GM notes stable after CEO exit; Clear Channel continues to move; Michaels profit boosts bonds

By Stephanie N. Rotondo

Portland, Ore., Dec. 2 - The distressed debt market once gain ended on a positive note Wednesday, though one trader said it "seemed like it was a shrug" as buyers outnumbered sellers.

General Motors Corp.'s bonds continued to hold their ground during trading, even after digesting the news from late Tuesday regarding the resignation of Fritz Henderson. According to news reports, the exit came as the company's board concluded that Henderson was not doing enough to turn the formerly bankrupt automaker around.

Meanwhile, Clear Channel Communications Inc.'s notes remained on the active side, and better, for that matter. But as per usual with that name, there was little news out to help explain the interest from investors.

Michaels Stores Inc. reported its third-quarter results during the session, which showed a swing to profit. The improved financials gave the company's bonds a boost, according to traders.

Nortek Inc. and Dynegy Holdings Inc. were both on the quiet side during the session, even with fresh news circulating in the market. Nortek filed an 8-K, which forecast its financials through 2014, while Dynegy is reported to be pricing a new debt issue. Neither piece of news did much to entice investors to the credits, or as one trader put it, "didn't turn anybody on."

GM stable following CEO exit

General Motors' bonds were staying in that same 21 to 22 range, according to a trader, despite news late Tuesday that the company's chief executive was stepping down.

The trader placed the benchmark 8 3/8% notes due 2033 at 22, "pretty much where they were yesterday."

Another trader saw the bonds due 2033 "hanging around" the 22 level, seeing them "active" around 21 bid, 22 offered, with the bonds going out at the latter level, which he termed unchanged on the day.

"They've been 20-21 for most of the week; [on Tuesday] they ticked up to 22 after the news [of CEO Fritz Henderson's abrupt resignation] and they're staying there," he said.

After the market closed Tuesday, news came out announcing Fritz Henderson's resignation and his replacement. Ed Whitacre Jr. - the current chairman installed by the Obama administration following the automaker's bailout - will take over as the top executive on an interim basis.

Henderson's resignation was effective immediately.

According to Bloomberg, Whitacre later told employees that the search to fill the position could take months, even a year.

GM has already been searching for a chief financial officer. Word has it that those considered for that post might now also be put up for the top spot.

Henderson had held the chief executive position for eight months, leading the company while it was nearing the brink. Several news outlets have indicated that GM's board forced the ouster, as they felt Henderson had not done enough to save the company.

Elsewhere in the autosphere, a trader also saw Findlay, Ohio-based tiremaker Cooper-Standard Automotive Inc.'s bonds higher in "active" trading, with its 7% notes due 2012 a point better at 90 bid, and its 8 3/8% notes due 2014 also up a point, in a 28 to 29 context.

There was, he said, "decent activity" in both bonds.

Clear Channel continues to move

Clear Channel Communications' bonds were "active again," a trader said, though - as is the trend with this particular credit - there was no news to explain the activity.

The trader quoted the 11% notes due 2016 around 57, up from 53 bid, 54 offered. The 10¾% notes due 2016 were also better at 67 bid, up from 65 before.

Another trader said that Clear Channel's bonds were "running" as they rose solidly for a second consecutive session.

He saw the San Antonio-based broadcasting and outdoor advertising company's 11% notes "right around 58," a gain of some 4 points on the session, on "good-sized trading"

He meantime saw its 6¼% notes due 2011 at 83, which he called a 4- or 5-point gain from recent levels, though on "not as much trading."

Even though there seemed to be no fresh news that might explain the recent surge in the bonds, he noted that it was "an active one on the day."

Another market source saw the 6¼% notes up more than 2 points on the session, ending at 83.5 bid.

Clear Channel's paper had also been firmer the previous week, with some participants citing rumors - at this point still unconfirmed and totally unofficial - that the company might float a bond issue and use the proceeds to take care of its near-term debt maturities.

Michaels' profit boosts bonds

A swing to profit helped Michaels Stores' debt gain some ground, according to market sources.

The trader said the bonds were trading "with a 103-handle on both of them," meaning both the 10% notes due 2014 and the 11 3/8% notes due 2016.

Another source quoted the issues at 103 bid, 104 offered.

For the quarter, the Irving, Texas-based arts and crafts retailer posted a net income of $15 million, compared with a net loss of $20 million the year before.

Net sales improved to $929 million, versus $906 million in 2008.

"We are pleased with our overall performance during the third quarter," said John Menzer, CEO, in the earnings release. "Our strong focus on execution, including the Halloween season, helped drive improved sales, gross margin and reduced per store inventory levels.

"Looking to the fourth quarter, we will be focused on driving customer traffic and capturing sales through the remainder of this year...While the company's transition to a customer-focused sales culture is still evolving, I am confident our new and improved merchandise and solid store level execution of our customer service goals, we are well positioned for this year's holiday season."

Nortek, Dynegy quiet despite news

Nortek's notes were on the quiet side, a trader said, even as the company filed an 8-K outlining its financial performance forecasts through the end of 2014.

"It didn't turn anybody on," the trader said, placing the 10% notes due 2013 at 102.75 bid, 103.75 offered "going into it."

Meanwhile, Dynegy Holdings' debt was also unfazed by fresh news. The company is intending to launch new $235 million 7½% mirror notes due June 1, 2015. Price talk is in the 88.5 area.

Credit Suisse and Citigroup are the bookrunners.

A trader saw the 7¾% notes due 2019 "bracketing" 82.25. Another source deemed the 7 5/8% notes due 2026 lower at 65 bid, 66 offered.

Paul Deckelman contributed to this article.

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