CIT unchanged to lower; Ford, GM softer on sales; Six Flags bucks the trend; FairPoint weaker

By Stephanie N. Rotondo

Portland, Ore., Oct. 1 - It was a weak day for the distressed debt market Thursday, according to traders. The negative tone was largely attributed to a "sloppy equity market," as one trader put it.

"Things in general were softer with the stocks," he said.

"It was weak today, as you might expect," said another source.

CIT Group Inc. continued to make the news, as the company reportedly is moving forward with a restructuring plan that includes a debt swap and possibly a bankruptcy filing. Traders saw the company's debt closing out unchanged to lower, depending on where you looked.

In the autosphere, September was a bad sales month for automotive companies - particularly General Motors Corp., whose sales fell 45% on the year. But even Ford Motor Co. saw its debt weaken on its sales figures, traders said.

Meanwhile, Six Flags Inc. was one of few names that managed to end the day in positive territory. One market player saw the bonds gaining as much as 3 points on the day, though there was no news to explain the gains.

CIT unchanged to lower

CIT Group debt continued to generate interest as the company attempts to move forward with a debt exchange.

"They were unchanged in the morning and then started backing off over the course of the day," a trader said. "Bids were fading by the end of the day and offerings were coming in."

He said the 4¼% notes due 2010 were down - but "not a lot" - and he saw them offered at 71.

"The best bid I saw was 68, but I am not even sure if that's there anymore," he said.

The 4¾% notes due 2010 meanwhile were hanging around the high-60s, though he said they traded as low as 65 toward the end of business.

"I think the focus is still CIT," said another trader. "People are waiting to hear what happens."

However, he said that early- and mid-level maturities were largely unchanged in the mid-60s.

Yet another source called the 5.20% notes due 2014 down 1 to 2 points at 50.75 bid, 51.5 offered.

On Wednesday, reports surfaced indicating the New York-based lender was set to begin a debt exchange that also required debtholders to vote on a pre-packaged bankruptcy plan. The company reportedly wants to get the vote out of the way in case the swap is not successful.

Some market players are wondering if the swap will be similar to an exchange done by residential Capital LLC late last year. In that scenario, longer-dated bondholders were pitted against those holding shorter maturities.

And, as credit default swaps on the name have seen gains of late, the general feeling is that a bankruptcy is imminent.

A CIT bankruptcy could also have what is being termed a "ripple effect" on retailers who rely on CIT for financing. One trader said that sector saw weakness, though whether that was in reaction to overall market weakness or CIT troubles was unclear.

Michaels Stores Inc.'s 11 3/8% notes due 2016 fell "a couple of points," he said to 91.5 bid, 92 offered. Neiman Marcus Group Inc.'s debt also "drifted off" to 85 bid, 86 offered from 86 bid, 87 offered previously.

"That one was pretty active today," he added.

Elsewhere in the financial realm, First Data Corp.'s 9 7/8% notes due 2015 were seen falling to 90 bid, 91 offered, versus levels around 93 previously.

"So they are down a fair piece," a trader said.

Another trader saw the 11¼% notes due 2016 softening to around 85.

"That's down about a buck," he said.

Ford, GM softer on sales

General Motors and Ford Motor saw their debt falling some on the back of a disappointing sales report.

A market source said GM was "down in the dumps," the benchmark 8 3/8% notes due 2033 at 15.25 bid, 16.25 offered. He deemed that down about a quarter of a point.

The source also saw Ford's benchmark 7.45% notes due 2031 drifting in a point to 79 bid, 81 offered.

Another source called the Ford 7% notes due 2013 just half a point weaker at 93 bid, while another said the 7.45% notes were unchanged around 81.

The latter source also said that GM's 7.20% notes due 2011 fell a point to 14 bid, 15 offered.

Ford's term loan was also down in trading as the company released September sales results, and the overall market tone didn't help matters, according to traders.

Traders quoted the term loan at 88 bid, 89 offered, down from 88.5 bid, 89.5 offered.

One trader remarked that the movement could have been more market-driven than credit specific but said, "It's hard to tell on a day like today."

For the month of September, total Ford sales were 114,655, down 5.1% from 120,788 in September 2008.

Total car sales for the month were 38,890, down 3.9% from 40,453 last year.

And, total truck sales were 71,049, down 6.9% from 76,281 in the prior year.

GM meanwhile saw 156,673 cars head out of its dealerships, a 45% decrease year-over-year. The industry as a whole attributed the steep declines in part to the end of the "Cash for Clunkers" program.

"September was a tough transitional month for the industry, and a difficult year-over-year comparison for GM," said Mark LaNeve, vice president of U.S. sales, in a press release. "Fortunately, the fourth quarter looks brighter and our year-over-year comparisons should look more favorable.

"As expected, the market returned to pre-Cash for Clunkers levels in September, but we believe that our four core brands - Chevrolet, GMC, Buick and Cadillac - are well positioned with new products to generate enthusiasm with our 60-day satisfaction guarantee and 'May the Best Car Win' marketing campaigns," he continued. "We're gearing-up fourth quarter production to replenish depleted dealer stocks and improve availability of our vehicles for customers."

Six Flags bucks the trend

Six Flags' notes moved higher in trading, though there was no real explanation for the move.

A trader called the 9 5/8% notes due 2014 up about 3 points at 20.5 bid, 22 offered.

"This is one of the few things that were up today," he noted.

Another source saw the issue gaining over 2 points to end at 21 bid.

Six Flags is a New York-based amusement park operator.

FairPoint loan weaker

FairPoint Communications Inc.'s term loan lost some ground during trading hours as the company announced that it did not make a $28 million interest payment that was due on its credit facility on Sept. 30, according to traders.

The term loan was quoted by one trader at 75 bid, 76 offered, down from 75.5 bid, 77 offered and by a second trader at 74.5 bid, 76.5 offered, down from 75 bid, 77 offered.

The bonds, however, traded very little on Thursday.

The missed payment constitutes an event of default, and therefore, the company entered into a forbearance agreement with lenders that is in effect through Oct. 30.

Even with the forbearance, pricing on the credit facility is increasing by 200 basis points as a result of the default.

Following the news, Standard & Poor's dropped its corporate credit and senior secured debt ratings on FairPoint to D from C.

FairPoint is a Charlotte, N.C.-based provider of communications services.

Sara Rosenberg contributed to this article.

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