Freescale bonds losing weight; GMAC paper mostly better; Masonite loan back on downward track

By Stephanie N. Rotondo

Portland, Ore., Jan. 20 - Distressed bond traders reported Tuesday that most of the day was spent "Obama-ing" - a term coined by one trader as much of the country - if not the world - watched the 44th president come into office.

But even as inauguration-goers proclaimed, "Yes we can!" investors said, "No we can't," placing the market under considerable pressure.

Still, in the distressed market at least, the losses were not so huge.

"I still think that things were unchanged despite what the stocks were doing," one trader noted.

"Apparently, we have a new president and that hasn't seemed to change the sentiment from the president before," another trader countered.

Also, as earnings reports from the last quarter start to come out, some are waiting for something to happen.

"I'm waiting for some earnings reports to impact our market, but I haven't seen it yet," a trader said.

Overall, trading was seen as "spotty," with not many notable names.

However, Freescale Semiconductors Inc. was a name several sources mentioned. The bonds continued their retreat, as well, with the debt falling as much as 9 points on the day.

Meanwhile, GMAC LLC's paper was seen better, though trading was thin. The company, which was given the right to become a bank at the beginning of the year, is continuing its struggle as it makes the transition.

Masonite International Inc.'s mild gains Friday returned to losses Tuesday. The company's term loan had begun to drop following a lender conference call on Tuesday, but had recouped some on Friday. Come Tuesday, traders once again saw the debt retreat.

Freescale losing weight

Freescale's debt "keeps getting cheaper," a trader said. "The tech sector is not doing so hot."

The trader called the 10 1/8% notes due 2016 weaker around 22. Another trader saw the 8 7/8% notes due 2014 fall from the high-30s to around "29-ish." Yet another source called that issue down 4 points at 31 bid.

Among other chipmakers, NXP BV's 7 7/8% notes due 2014 close at 35 bid, 37 offered, trading more toward the offer side, according to a trader. The 9½% notes due 2015 ended at 10.5 bid, 11 offered.

Decline in demand has hurt Freescale, causing the company to make numerous job cuts and even slash executive salaries. NXP has suffered the same fate, as it tries to sell off assets.

Freescale will release its quarterly results on Jan. 29 at 3 p.m. ET.

GMAC mostly better

Trading in GMAC has been on the quiet side ever since the company was able to make good on its quest to become a bank holding company. Traders said activity in the name Tuesday was rather slight.

Still, what was trading was largely better. One source called the 6 7/8% notes due 2012 3 points better at 68 bid, while the 6 5/8% notes due 2012 gained 4 points to close at 68 bid, as well.

GMAC's application to become a bank - and therefore gain access to TARP funds - became official just before the New Year hit. Still, some reports suggest that the new status and bailout funds have done little to loosen the company's purse strings. One such report indicated that GMAC continues to reject credit applications, despite the company's agreement to lower minimum credit score ratings. Others have also objected to GMAC's loan rates, which some see as still higher than competition.

Masonite loan slides again

Masonite International's term loan reverted to its old ways on Tuesday, giving up its gains from the previous session although the cause behind the backslide seemed less credit specific and more market-related, according to a trader who focuses on distressed names.

The term loan was quoted at 35 bid, 38 offered, down from Friday's levels of 38 bid, 40 offered and pretty much in line with last Thursday's levels of 36 bid, 38 offered, the trader said.

"Everything is sort of soft today. Nothing particular in Masonite today. Stuff that trades within a half a point is down a point at least [and] Masonite is pretty sloppy," the distressed trader remarked.

On Friday, the term loan was said to have moved higher as a result of news coming out that the company's loan forbearance agreement was extended to Jan. 30 from Jan. 15.

The company needs the forbearance since it was unable to comply with covenants related to EBITDA metrics as of June 30 and Sept. 30.

As was previously reported, Masonite is still currently engaged in ongoing negotiations with its bank lenders regarding a potential amendment to the terms of the credit facility.

In addition to the loan problems, the company also needed to get a forbearance agreement covering a default for failing to make an Oct. 15 interest payment on its senior subordinated notes due 2015. This agreement expires on Jan. 31.

During the forbearance periods, the company is trying to develop an appropriate capital structure to support its long-term strategic plan and business objectives.

Masonite is a Mississauga, Ont.-based manufacturer of residential and commercial doors.

Sara Rosenberg contributed to this article.

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