AIG bonds active, better post-numbers; Nuveen notes slip; CIT barely a blip; Ford boosted

By Stephanie N. Rotondo

Portland, Ore., Aug. 7 - American International Group Inc. was the dominating name Friday in an otherwise subdued marketplace for distressed debt, traders reported.

AIG reported its second-quarter results during the session, which showed a turn to profit for the first time since 2007. As a result, the bonds gained a good 4 to 5 points.

In other financials, Nuveen Investments Inc. also reported numbers. However, as the results were largely expected, market players did not see much activity. Similarly, there was a surprising lack of action in CIT Group Inc.'s debt after the company announced its early tender results.

In the automotive arena, Ford Motor Co.'s bank debt got a small boost. The gain was attributed to the official extension and expansion of the government's "cash-for-clunkers" program.

AIG active, better post-numbers

AIG made up the bulk of the day's trading volume, traders reported, after the insurer reported its second-quarter results.

A trader said $35 million of the 8.175% notes due 2058 - "that's really the main trader," he said - ended around the 40 mark, a 4- to 5-point gain on the day. He also saw the 6¼% notes due 2037 gaining the same amount to around 37.

Another trader said there was "a lot of movement" in the name, placing the 5.45% notes due 2017 in the mid-60s from the high-50s on Wednesday and 60 bid, 62 offered on Thursday.

The second trader also called the 5 3/8% notes due 2011 "really active" in the mid-80s, compared to levels in the low-70s Wednesday.

"They actually had reasonable numbers," the first trader commented. "Swap contracts are down. There is an expectation that they are not going to go away," which was creating a nice comfort level for the market.

AIG posted its first quarterly profit since the third quarter of 2007 in the second quarter of 2009. The company reported income of $311 million, or $2.30 per share, versus a net loss of $5.4 billion, or $41.14 per share, in the same period of 2008. Adjusted net income came to $2 billion, compared to an adjusted net loss of $1.3 billion the year before.

"Our results reflect stabilization in certain of our businesses," said Edward M. Liddy, AIG chairman and chief executive officer, in the earnings release.

"The primary drivers of our positive second-quarter results were reductions in net realized capital losses, primarily due to the decline in other than temporary impairments resulting from the adoption of new accounting guidance and improved market conditions; positive valuation changes for our Maiden Lane interests on a net basis; continued reductions in the risk profile of the AIG Financial Products Corp. portfolio; a reduction in the allowance for recoverability of deferred tax assets, reflecting the effect of recently announced transactions; and gains on hedges not accounted for under FAS 133.

"While our insurance companies' operating results remain challenged, largely driven by weak economic conditions and the lingering effect of negative AIG events earlier in the year, performance trends stabilized from the first quarter."

Liddy also commented on the status of the restructuring process.

"We continue to make significant progress in our efforts to restructure the organization, stabilize its capital structure, and maintain our liquidity position," he said. "We remain focused on the overriding goal of putting AIG in the best possible position to meet our obligations to stakeholders, including U.S. taxpayers, by protecting and enhancing the value of our businesses and positioning our key franchises for the future."

Liddy, however, declined to give a timeline for when the restructuring might be completed.

Nuveen slips, CIT barely a blip

Elsewhere in the finance realm, Nuveen Investments put out its second-quarter numbers. One trader said the results "were not a surprise," and there was little reaction in the bonds.

A market source pegged the 5% notes due 2010 at 96½ bid, 97½ offered, a point weaker day over day.

Nuveen's management gave an upbeat forecast for its business during its conference call to discuss the results. The company said that improving business fundamentals, as well as an improvement in assets under management, was the cause for the rosy outlook.

At the end of the quarter, Nuveen had $127.8 billion in its investment portfolio, an 11% increase from the first quarter of 2009.

The company also gave an update on a refinancing announced in July. Nuveen had planned to raise $450 million but said during the call that the amount was raised to $500 million.

"While the cost of this financing was relatively high, we believe that the transaction provides significant benefits in enhancing our overall liquidity and financial flexibility and, as a result, provides significant cushion against any unforeseen market down draft," Glenn Richter, the company's chief operating officer, said.

Also in the sector, CIT Group gave an update on its tender offer for $1 billion of its floating-rate notes coming due Aug. 17.

As of the Wednesday early tender deadline, the company had met its 58% participation requirement. The offer will expire at midnight on Aug. 14.

The company also said it had fully drawn down its $3 billion credit facility organized by a group of bondholders. And, CIT said it has chosen to suspend its dividend program on its preferred stock.

However, the news seemed to do little for the bonds. One trader said the name was "almost nonexistent."

"It hasn't been very prominent," said another trader, who noted there were "a lot of small trades" in the name.

A source quoted the floaters at 96 bid, 97 offered and the 6% notes due 2036 at 53 bid, 54 offered, both up 1 to 2 points.

Ford boosted by bill signing

Ford Motor's term loan moved higher as the "cash-for-clunkers" program extension and expansion was officially signed into law by president Barack Obama after being approved by the Senate on Thursday, according to a trader.

The term loan was quoted at 88½ bid, 89¼ offered, up a point on the day, the trader said.

Under the law, people who trade in old cars for more efficient new cars will receive $3,500 to $4,500.

The program was increased to $3 billion from $1 billion and extended into Labor Day.

On Aug. 3, Ford came out with July sales numbers in which total sales were 165,279, up 2.3% from 161,530 in the comparable period last year.

The Dearborn, Mich.-based automaker said that customer demand for its fuel-efficient vehicles coupled with the U.S. government's Car Allowance Rebate System enabled it to post the first sales increase of any major manufacturer in 2009.

Elsewhere in the autosphere, American Axle & Manufacturing Inc.'s notes were "shooting upwards," a trader said, marking the third straight session of gains.

The trader placed the 7 7/8% notes due 2017 at 511/2, up from 35 bid, 36 offered at the beginning of the week. The 5¼% notes due 2014 were also better at around 513/4.

The bonds had started moving higher Wednesday after the company posted a narrower-than-expected loss.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.