GMAC, ResCap higher; autosphere debt tumbles again as bailout talks stall; NXP dives; Bon-Ton gains

By Stephanie N. Rotondo

Portland, Ore., Nov. 20 - It was yet another weaker day in the world of distressed bonds and GMAC LLC was one of few that managed to end the session better.

GMAC, along with its Residential Capital LLC subsidiary, saw their bonds gain some after GMAC announced it had officially applied to become a bank holding company. The company also announced a $38 billion debt exchange offer.

Still, traders said that price fluctuations in GMAC - as well as its parent, General Motors Corp. - were horrendous, which made nailing down a market difficult.

"It was another day where maybe we have capitulation," a trader said. "Lots of gyrations. It was hard to pinpoint where things are."

But while GMAC fluctuated it a somewhat positive manner, GM was not as lucky. GM, along with sector rivals Ford Motor Co. and Chrysler Financial Services LLC, saw its debt decline, as the chances of getting a federal funded bailout seemed more and more unlikely.

NXP BV revised its sales outlook for the fourth quarter. The revision did not seem to make investors happy, as traders saw the chipmaker's bonds fall about 10 points on the day.

Bon-Ton Stores Inc. also revised its outlook for the current quarter. But a narrower third-quarter loss explained why the retailer's notes managed to gain some during trading. But Sally Holdings LLC was not as lucky. A trader deemed the debt weaker, though numbers were not terribly bad.

"You name it, it's down," a trader said, describing the overall tone of the day. "Take your pick."

"Everything is down, everything was so ugly," said another trader. "This market is just horrible."

GMAC, ResCap boosted

GMAC's paper got a boost after the company announced it had applied for bank status and that it had begun an exchange offer for $38 billion in notes.

One trader saw the 5 5/8% notes due 2009 trade up to 80 from 62 on Thursday. However, another trader said the benchmark 8% notes due 2031 fell 9 points to 28 from 37.

At another desk, a trader quoted the 8% notes at 27 bid, 29 offered and the 6 7/8% notes due 2011 at 40 bid, 42 offered. Meanwhile, ResCap's 9 5/8% notes due 2015 improved to 13 bid, 15 offered from 9 bid, 11 offered previously.

Yet another source saw ResCap's 8 7/8% notes due 2015 up 4 points at 11 bid.

GMAC, General Motors' 49%-owned financing arm, had previously announced its intentions to apply for bank holding status in an attempt to gain access to the government's $700 billion rescue fund. GMAC, as well as its ResCap subsidiary, has posted several quarters of losses since the subprime housing blow-up last summer. GMAC's losses from mid-2007 have totaled $7.9 billion.

In another move to keep bankruptcy at bay, GMAC said it would exchange $38 billion in notes issued by GMAC itself, as well as ResCap. Holders of GMAC paper can tender for a combination of new senior bonds with the same interest rate and maturity as their existing debt, as well as new 5% perpetual preferred stock in a wholly owned subsidiary of GMAC. Noteholders can also choose a cash option and holders of the benchmark 8% notes will also receive 8% subordinated notes due 2018.

ResCap's bondholders will receive a combination of new senior and subordinated debt equaling as little as 50 cents on the dollar for their debt. Those electing to go the cash route will receive as little as 20 cents on the dollar. Holders of the recent 8½% notes due 2010 will receive 7½% GMAC senior notes due 2013, worth about 75 cents on the dollar, or, if they choose cash, 50 cents on the dollar.

But the news was not all good. In its filing with the Securities and Exchange Commission, GMAC said that is the exchange is unsuccessful, "there is a significant risk that GMAC will trigger a default under certain of its secured and unsecured funding and credit facilities."

Autosphere debt drops

In the autosphere, GM, Ford Motor and Chrysler Financial all saw their term loans head lower as the chances of a congressional bailout dimmed.

GM, a Detroit-based automotive manufacturer, saw its term loan quoted at 33 bid, 34 offered, down from 36.5 bid, 38.5 offered.

Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 33 bid, 34.5 offered, down from 35.75 bid, 36.75 offered, the trader said.

And, Chrysler Financial, a provider of automotive financial products and services, saw its first-lien term loan quoted at 52.75 bid, 53.75 offered, down from 55.5 bid, 56.5 offered.

In the bonds, traders said it was difficult to pinpoint markets in GM - as well as those of the company's financing arm, GMAC - as prices fluctuated massively throughout the day.

"It was very hard on GM in particular," a trader said. "People can't make hide or hair of the thing."

Still, the trader quoted GM's benchmark 8% notes due 2031 at 12 bid, 19 offered. But he also added that the bonds traded at 19, followed by a trade at 10.

Another trader agreed that GM's bonds were "all over the place," with the long-dated paper trading as low as 10 to as high as 18 bid, 19 offered.

"It was crazy," he said.

Another market source called Ford's 7% notes due 2013 3.5 points weaker at 43.5 bid.

Early on in the day there were reports that a government bailout for the auto companies could be coming soon, although there was also chatter that a proposal might not get approved.

Later on in the session, talk turned to the companies being unable to get access to any government help right away and that instead, the automakers would have to make their case to Congress next month. Lawmakers also asked that the companies put together a business plan that would show how the sought-after funds would better their industry.

Also on Thursday, Ford's corporate credit rating was lowered to CCC+ from B- by Standard & Poor's, and removed from CreditWatch.

S&P said that the downgrade reflects increasing and ongoing cash use in the company's automotive operations caused by plummeting light-vehicle demand and the dramatic consumer shift away from large pickup trucks and sport utility vehicles.

In addition, the rating reflects the possibility that the problems the company faces could overwhelm its cash and liquidity during 2009, the rating agency added.

NXP drops on revised forecast

NXP's bonds dropped as much as 10 points on the day as the company forecast a weak fourth quarter, which resulted in a downgrade.

A trader pegged the 9½% notes due 2015 at 16 bid, 21 offered, down from 26 bid, 28 offered.

Another trader placed that issue at 16.5 bid, 20.5 offered and the floating-rate notes due 2013 at 30 offered.

The Dutch chipmaker said it expects sales to fall 15% to 25% during the quarter, compared with a previous estimate of an 8% to 14% decline in sales.

"Visibility of sales remains very limited," NXP said in a statement.

Upon hearing the news, S&P dropped its rating on NXP to CCC from B-.

Bon-Ton gains, Sally slides

Bon-Ton's debt gained some during the session, after reporting its quarterly results and another forecast revision.

Several sources called the 10¼% notes due 2014 "slightly better" at 13.5 bid, 14.5 offered.

"That is a little better than the day before but marginally," a trader said.

For the third quarter, Bon-Ton narrowed its loss to $14.3 million, or 85 cents per share. However, the retailer does not expect to do the same in the fourth quarter.

Bon-Ton once again lowered its forecast, now expecting a loss of $1.41 to $2.01 per share, versus prior estimates of 95 cents per share. Sales are expected to decline 6.5% to 7.5%, compared with previous projections of 3.5% to 5%.

Elsewhere in the retailing world, Sally Beauty posted numbers and a trader saw the bonds fall in response.

The trader saw the 9¼% notes due 2014 at 73 and the 10½% notes due 2016 at 55.

The beauty supply distributor reported net profit of $21.5 million, compared with $16.9 million the year before. Sales moved up 5.1% to $672.2 million.

Broad market declines

Ply Gem Industries Inc.'s bonds were called lower after S&P placed the company on watch.

A trader said the 11 ¾% notes due 2013 were quoted at 60 bid, 65 offered on Wednesday and opined that the market was "more like" 55 bid, 60 offered on Thursday. The 9% notes due 2012 closed at 25 bid, 27 offered. However, there were no trades in the name.

Meanwhile, Harrah's Entertainment Inc.'s paper was somewhat unchanged following a downgrade from Moody's Investors Service. A trader quoted the 10 ¾% notes due 2016 at 22 bid, 22.5 offered, adding that the debt has been trading in a range between 20 and 25 for a few days.

First Data Corp.'s 9 7/8% notes due 2015 slipped a point to 52, while Community Health Systems Inc.'s 8 7/8% notes dipped to 76, "down 10 pints since Monday," a trader said. He called both issues reasonably active in an otherwise inactive day.

Sara Rosenberg contributed to this article.

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