CIT regains ground, news pending; Neiman notes better, company chooses to PIK; Ford bonds firm

By Stephanie N. Rotondo

Portland, Ore., July 15 - Investors were still clamoring for CIT Group Inc. paper Wednesday, even as trading in the company's stock was halted about an hour before the market closed.

The halt came as "pending news" was expected to be released within 24 hours. That in turn revived speculation that the government was planning to come to the struggling bank's rescue and the company's bonds improved.

Meanwhile, Neiman Marcus Group Inc. also got a shot in the arm, however small. The gains came on the back of news that the company had chosen - again - to pay interest on its notes in kind. Also, the company announced it amended its credit facility.

Ford Motor Co. might be able to steal some market share from its Detroit rival, according to the results of a survey released Wednesday. The results might have been the cause for firmness in the company's debt.

CIT regains ground

CIT Group remained the day's focus, traders reported. The name was given further attention after trading in the company's stock was halted due to "pending news."

Still, buzz that the government was nearing a bailout deal helped the company's bonds gain some ground.

A trader saw the paper all firming, the floating-rate notes due 2009 at 88 and the 4¾% notes due 2010 at 71 bid, 72 offered. He also saw the 5% notes due 2014 at 61 bid, 62 offered, the 5.8% notes due 2036 at 56 bid, 57 offered and the 6.1% notes due 2067 at 28 bid, 29 offered. On the latter issue, that compared with 24 bid, 25 offered Tuesday.

"It's all CIT again," the trader said. "Holy crap, it's unbelievable."

Another trader said CIT was "obviously notable" and "in general I'd say it rallied." He placed the floaters due 2009 around 86, down from the day's high in the low-90s.

"It's all over the place," he said. "It's a moving target."

News outlets reported that several paths have emerged for the government and CIT to take in an effort to avoid a failure. One option is a temporary loan, while another would give CIT access to the Federal Reserve's discount option and asset transfers. However, there is no guarantee that a deal will come within the next 24 hours - if ever.

Should CIT fail, though, it could mean even tougher times for retailers and restaurants. In a letter to the Treasury Department, Tracy Mullin, chief executive of the National Retail Federation, addressed that very issue.

"CIT is most certainly too important to the retail industry to be allowed to fail, and the retail industry is too important to the economy to be placed under additional stress," Mullin wrote. The bank's collapse would "impact thousands of retailers" and "that cannot be allowed to happen at a time when retailers are already struggling to survive the national recession."

Neiman notes better

Neiman Marcus Group's debt traded better after the company said it would pay in kind on interest due on its 9% PIK notes due 2015.

A market source deemed the 10 3/8% notes due 2015 up half a point at 56 bid, while another quoted the 9% notes at 58 bid, 59 offered. At another desk, the 10 3/8% notes were seen at 56 bid, 58 offered.

One trader said "paper was better," the 9% notes at 60 bid, 61 offered.

The Dallas-based high-end retailer said in a regulatory filing Wednesday that it would choose the PIK option for the third time this year. The first was for the period ending April 14 and the second on July 14.

Also, Neiman announced it had secured an amendment to its senior secured revolving credit agreement. The new terms revise certain covenants, but new interest rates were put into place, varying by usage. The new rates are Libor plus 425 basis points though Oct. 1, 2010, and in the range of Libor plus 400 bps to 450 bps thereafter.

"We are very pleased with the outcome of our process and the strong level of support we received from this leading group of bank institutions," said Jim Skinner, chief financial officer, in a statement. "We believe our success in maintaining our facility size is evidence of the confidence that our banking group has in our company and our ability to effectively manage our business during this challenging economic period. This facility, combined with our current cash balance in excess of $250 million, provides us with ample liquidity to support the growth of our company."

Ford firms on survey results

A new survey out Wednesday showed that Ford might gain market share from its formerly bankrupt rival, General Motors Corp., which could have been the reason for gains in the automaker's debt.

A trader said the bonds were up "3 to 4 points in the long end," the 4¼% notes due 2036 at 83 bid, 84 offered. However, he deemed the 7 7/8% notes due 2010 unchanged around 96.

Another market player pegged the 7% notes due 2013 at 81 bid, a gain of 4 points on the day. The benchmark 7.45% notes due 2031 improved by 3 points to 60 bid, 62 offered.

According to a survey conducted by CNW Marketing Research, Ford might be able to steal customers interested in GM's Pontiac brand, as that brand will be terminated under the company's reorganization plan. About 38% of those customers said they would choose Ford if Pontiac was not available, over GM's other brands.

GM itself received only 33% of votes.

Nortel shrugs off bomb threat

Nortel Networks Corp.'s bonds were largely unaffected by news of a bomb threat - the second in a week - at its French factory, according to traders.

A source saw the 10¾% notes due 2016 declining a deuce to 32 bid, 33 offered. But another said there was very little trading and said the bonds were "all still around 30."

Workers at the plant in Yvelines near Paris were upset by terms of a mass layoff set to occur once Nortel exits bankruptcy. About 480 jobs will be lost.

To make their point, the workers placed several gas cylinders around the plant and threatened to blow the place up if management refused to enter into talks with the disgruntled group. Management had previously canceled a meeting scheduled for Monday.

As it turned out, the cylinders were empty and after management agreed to a meeting, the cylinders were reportedly removed.

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