Sprint Nextel bonds give up gains; General Motors, Ford loans slip; Goodyear debt mixed on downgrade

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Feb. 20 - The distressed bond market ended the week on a lighter tone, traders reported Friday.

"It was weaker all day and continuing to drift," a trader said.

Even Sprint Nextel Corp., which had seen its debt gain as much as 4 points during Thursday's session, gave up some of those gains come Friday. The company's debt closed unchanged to down about 2 points overall.

Market sentiment regarding automakers has not been good of late and some traders blamed that for losses in General Motors Corp. and Ford Motor Co.'s term loans. Still, GM's bonds remained somewhat steady, despite news that the company's Saab business got the ax.

In a related name, Goodyear Tire & Rubber Co.'s bonds finished the day mixed following a downgrade from Moody's Investors Service.

Sprint gives up gains

Sprint Nextel's bonds gave up some gains on Friday after getting a boost in the previous session on the back of better-than-expected fourth-quarter results.

A trader saw the 8 3/8% notes due 2012 falling more than 2 points to around 80, with $15 million trading. The 7 5/8% notes due 2011 dropped more than half a point to close around 85.5, with about $10 million changing hands.

The trader noted that the debt was not as actively traded as in Thursday's session and that, overall, the name was down half a point to 2 points.

Another trader called the bonds unchanged to down half a point, the 7 5/8% notes at 85 bid, 85.5 offered and the 8 3/8% notes "just below 80."

Sprint's bonds had gained as much as 4 points during Thursday trading, following the release of its fourth-quarter numbers. The company posted $1.6 billion loss for the quarter.

But the shining light was the company's statement that subscriber losses would ebb in the coming year after it lost about 4.6 million customers in 2008.

Still, not everyone reacted positively to the news.

"The outlook is not very rosy," Gimme Credit LLC analyst Dave Novosel wrote in a morning report. "Sprint did not provide any guidance other than to say the loss of subscribes will improve."

Novosel said that Sprint's attempts to improve its customer service were the likely factor in its belief that customers will stop defecting. The Overland Park, Kan.-based wireless network provider has gained in customer satisfaction and has thus been able to close call centers - and therefore save money.

Furthermore, Novosel said that Sprint's liquidity remains good. But he maintained that a turnaround was not looming.

"We believe Sprint has the asset base, management team and sufficient scale to turn things around," he wrote. "However, that day is not forthcoming in the near term."

Elsewhere in the telecommunications sector, Charter Communications, Inc.'s 10¼% notes due 2010 had "a little bounce," a trader said, closing up half a point at 82.75.

Nortel Networks Corp.'s bonds were largely inactive despite news that the company was looking to sell off some of its assets and had secured a stalking horse bidder. A trader quoted the floating-rate notes due 2011 at 14 1/8 bid, 14 3/8 offered.

GM, Ford down; Goodyear mixed

Both General Motors and Ford Motor saw their term loan levels fall off during trading hours on continued negativity toward the auto sector, according to a trader.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 36 bid, 38 offered, down from 39 bid, 41 offered, the trader said.

And, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 31 bid, 32 offered, down from 32½ bid, 33½ offered, the trader continued.

The trader explained that continued rumblings of a possible bankruptcy scenario for General Motors, as well as the concerns that people have had for auto companies for a while now, probably caused the downfall in trading levels.

But GM's bonds were relatively unaffected, traders reported. One trader called the benchmark 8 3/8% notes due 2033 a half-point weaker at 16, while another deemed that issue unchanged, also at 16. The second source also saw the 7.2% notes due 2011 at 21, a loss of a point.

GM's financing arm, GMAC LLC, saw its 5 5/8% notes due 2009 edge up slightly to just over 91, while its 6¾% notes due 2014 closed unchanged at 51.

General Motors did have some news come out on Friday, as its Saab business announced that it is filing for reorganization under a self-managed Swedish court process to create a fully independent business entity that would be sustainable and suitable for investment.

As part of the process, Saab will formulate its proposal for reorganization, which will include the concentration of design, engineering and manufacturing in Sweden.

This proposal will be presented to creditors within three weeks of the filing.

Pending court approval, the reorganization will be executed over a three-month period and will require independent funding to succeed, which will be sought after from both public and private sources.

The reorganization should have no impact on other General Motors' operations.

"We explored and will continue to explore all available options for funding and/or selling Saab and it was determined a formal reorganization would be the best way to create a truly independent entity that is ready for investment," Jan Ake Jonsson, managing director for Saab Automobile, said in a news release.

Meanwhile, Goodyear Tire's debt ended the week mixed following a downgrade from Moody's Investors Service.

A trader saw the floating-rate notes due 2009 quoted at 93 bid. He also saw the 7.857% notes due 2011 down a point at 82.5, while the 8 5/8% notes due 2011 gained a quarter-point to 83.75.

Moody's cut Goodyear's speculative-grade liquidity rating to SGL-3 from SGL-2. The agency also affirmed the company's corporate credit rating at Ba3.

Moody's said the downgrade reflected concerns over the company's ability to generate free cash flow over the next 12 months as overall market conditions deteriorate.

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