GM slides as CEO ousted; Ply Gem bonds fall on back of numbers; Charter holds steady in light trading

By Stephanie N. Rotondo

Portland, Ore., March 30 - General Motors Corp.'s bonds slipped during Monday trading after the company's top executive was forced to resign.

Rick Wagoner was forced to step down on Sunday after the Obama administration told the company its viability plan was no good. The automaker, with its new leader in place, now has to revise its plan and will likely have to make deeper cuts in order to get more government aid.

Meanwhile, Ply Gem Industries Inc. announced its fourth-quarter results. The numbers put more pressure on the company's debt, though management said that the company had sufficient liquidity to weather the economic storm.

JPMorgan Chase & Co. is claiming that Charter Communications Inc.'s recent Chapter 11 filing constituted a change of control and therefore bank lenders should be able to reprice their debt. But the cable provider's bonds were little affected by that piece of news.

Overall, traders called the day everything from "boring" to "quiet" to "useless" as the stock market "got brutalized," according to one trader.

The trader noted that about $830 million traded in the high-yield sector, well down from normal levels around $1 billion. He said the lack of volume was likely a result of the "250-point bonking" in the equities and that it was a Monday.

GM slides as CEO ousted

General Motors' bonds dropped as much as 4 points during Monday trading after the company's chief executive was forced to step down on Sunday.

A market source quoted the 7.2% notes due 2011 at 18 bid, 19 offered and the benchmark 8 3/8% notes due 2033 at 16 bid, 17 offered. The source called both of those issues about a point weaker.

Another trader saw about $5 million of the benchmark issue trade at 16, which he called "a couple points weaker."

Yet another source saw the 7 1/3% notes due 2013 4 points softer at 18 bid, 19 offered.

The Obama administration forced Rick Wagoner, GM's chief executive officer, to resign Sunday as the company sought more federal aid. Fritz Henderson, formerly the Detroit automakers' president and chief operating officer, will take up the helm.

The ouster was part of the conditions for GM getting additional government funds. The company will receive "adequate working capital" for the next two months while the auto task force once again looks over the situation.

"We cannot, we must not, and we will not let our auto industry simply vanish," said President Barack Obama in a press conference at the White House. He also announced new deadlines and requirements for GM, as well as Chrysler LLC. "But we cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars."

Still, Obama said that Wagoner's exit was not a "condemnation."

"Rather, it's a recognition that it will take new vision and new direction to create the GM of the future," he said.

GM's new CEO, however, has differed from Wagoner in one key respect. Henderson has already claimed that GM is considering bankruptcy as an option, something Wagoner continually dismissed as a viable option.

"The government believes GM's current restructuring plan is inadequate so it is giving GM 60 days to present a plan with deeper cost cuts and will provide government loans to keep GM afloat during that time," wrote Gimme Credit analyst Shelly Lombard in an afternoon comment. "Three key variables that of course no one can peg are how low vehicle sales will fall during this recession, how long it will take for sales to rebound, and what level they will rebound to. So we assume the Obama administration wants to see a plan based on more conservative assumptions and maybe more concessions from bondholders and the UAW."

Lombard reiterated her sell recommendation on the bonds.

Ply Gem falls on numbers

Ply Gem's debt fell 4 to 5 points, traders reported, after the company posted its fourth-quarter results.

A trader saw the 9% notes due 2012 at 25.5, with about $10 million changing hands. Another trader saw the issue falling into the high-20s from around 33.

The second trader also saw the 11¾% notes due 2013 at 46, down from the mid-50s on Friday.

For the quarter, net sales decreased 26.2% to $234.5 million from $317.9 million the year before. Adjusted EBITDA slipped to $5.7 million from $32.3 million for the same quarter of 2007.

Overall, net loss came to $27.9 million, versus a net loss of $10 million the previous year.

"Ply Gem's fourth quarter and full year sales and EBITDA results reflect the challenging market conditions that continue to exist in the current economic environment," said Gary E. Robinette, president and CEO of Ply Gem, in a statement. "We continue to pursue the initiatives that are helping us compete effectively in this historic housing slump. We continue to realign our cost structure for current and future market demand. At the same time, we are focused on maximizing cash flow and outperforming the market place in all business units, allowing us to emerge stronger when the economy recovers."

"On March 25, 2009, Ply Gem announced that it would incur a fourth quarter non-cash goodwill impairment charge of approximately $250.0 million in addition to the $200.0 million non-cash goodwill impairment charge recorded in the company's third quarter financial results," added Shawn K. Poe, vice president and chief financial officer. "These non-cash impairment charges are a result of the depressed market conditions that currently exist in residential new construction and remodeling markets. These goodwill impairment charges did not affect Ply Gem's cash position, cash flow from operating activities, revolver availability or liquidity position and does not have any affect on current or future operations of the company."

As of Dec. 31, 2008, Ply Gem had $111 million in available liquidity, including a $52.9 million borrowing base available under its asset-backed revolving credit facility and $58.3 million in cash on hand.

Ply Gem is a Cary, N.C.-based manufacturer of residential exterior building products.

Charter steady, quiet

Charter Communications' paper ended the session virtually unchanged despite news that JPMorgan Chase & Co. was calling the company's recent bankruptcy a change of control.

A trader quoted the 10¼% notes due 2010 at 90 bid, 92 offered, the 8% notes due 2012 at 92 bid, 93 offered and the 8 3/8% notes due 2014 at 87 bid, 88 offered.

Another source saw the 9.92% notes due 2014 trade at 1 bid, 2 offered, a slight gain day over day, while the 6½% notes due 2027 moved up more than a point to 8 bid, 9 offered.

JPMorgan, acting as an agent for some bank lenders, said Charter's Chapter 11 filing last week constitutes a change of control and thus lenders should be able to reprice their debt.

But Charter is hoping to "reinstate" about $11.8 billion in loans, meaning that the debt remains with existing terms. If Charter fails to do so, the company will have to secure new loans, which could carry heftier terms than those already in place. Charter's lawyer told the bankruptcy judge overseeing its case that new loans could mean as much as an additional $500 million in annual interest expense.

Charter is a St. Louis-based cable provider.

Broad market mixed

Among other names in the distressed marketplace, R.H. Donnelley Corp.'s 8 7/8% notes due 2016 remained around 6, a trader said.

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 were also unchanged at 93.25.

Among financials, American International Group Inc.'s 5.20% notes due 2011 closed at 40.5, with about $9 million trading.

GMAC LLC's bonds coming due in May closed at 95, with $25 million trading.

Elsewhere, General Growth Properties Inc.'s 8% notes coming due on April 30 fell about 5 points, a source said, to around 27. The decline came as the company said it failed to get enough consents to a forbearance.

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