Distressed names gain with firm market; NewPage up; Smurfit, Six Flags set funding meetings

By Paul Deckelman and Sara Rosenberg

New York, Jan. 5 - A rising tide lifts all boats, and that was certainly the case on Tuesday in the distressed-debt market, which got a boost from overall strength seen in the fixed income markets, particularly in Junkbondland and among bank debt issues.

Traders saw NewPage Corp.'s bonds shoot up dramatically into the lower 80s from prior levels in the 70s. Although several said they saw no fresh news out about the Miamisburg, Ohio-based maker of coated papers, a news report indicated that some analysts are more optimistic about the prospects for that industry.

Ford Motor Co.'s bonds, convertibles and bank debt and were all up, as the carmaker reported stellar sales numbers for December to bring an end to one of the toughest years ever for the U.S. automotive industry. Ford domestic arch-rival General Motors Corp.'s bonds were also up, helped by its own smaller-than-feared sales decline for the month.

Former GM financing unit GMAC LLC revealed that it expects to post a $5 billion fourth-quarter loss, thanks to deep writedowns on underperforming mortgage loans which it tries to sell. Meanwhile, traders saw little follow through, besides an odd quote here and there, from the big gains which GMAC subsidiary Residential Capital LLC enjoyed on Monday

The bankrupt Smurfit-Stone Container Corp. and Six Flags Inc. were each seen by bank debt market sources to have scheduled bank meetings for their respective $1.2 billion and $830 million exit financing facilities.

NewPage pops powerfully

A trader saw NewPage's 10% notes due 2012 "probably pretty active and up quite a bit," quoting the Miamisburg, Ohio-based coated paper maker's bonds as having jumped to the 80 bid level on Tuesday, with "lots of trading" in a 79-80 context, well up from 73½ bid, 74 on Monday.

He, like several other traders, professed no visibility as to what was driving the bonds up. "I don't see what the news is," he declared, and usually you don't get that big a pop unless there's news out there."

Another trader said that NewPage's paper was about the busiest of the day, racking up over $40 million by the close. He saw the bonds at 73½ bid "first thing in the morning," but then gradually move up to 80½ bid, 80 3/8 offered, although he knew of no specific news about the company to explain the rise.

However, The Wall Street Journal cited new research reports that see an improved outlook for the coated paper sector, and traders also pointed to the overall continued strong junk market conditions.

Ford firmer on good numbers

Ford Motor Co.'s bonds were seen better, especially after the Dearborn, Mich.-based carmaker reported a sizzling nearly 33% gain in December sales versus year-earlier levels, which allowed Ford to close out a generally miserable 2009 showing a 15% decline for the year in sales versus 2008 - around half the decline which chief competitor GM saw.

A market source saw the Ford 7.45% bonds due 2031 having firmed to the 92 level from prior round-lot levels around 90.

Meanwhile the 8 1/8% notes due 2020 recently issued by Ford's unit, Ford Motor Credit Co., were seen having improved about ½ point to just under par.

While a trader saw "a lot of small trades" in Ford, "except for the short-dated paper," which trades on a yield-to-call basis, round-lot activity was seen as brisk in the Ford Credit 8 1/8s, with well over $20 million having changed hands.

In the bank-debt market, a trader said Ford's old term loan was stronger on Tuesday following the company's announcement of December and full year sales results.

The old term loan was quoted at 94 bid, 96 offered, up from 93 bid, 95 offered, the trader said.

A trader in convertible debt meantime said that Ford's 4.25% converts due 2016 had firmed to 136.9 bid from 128.1 on Monday, while its 4.25% converts due 2036 rose to 138.3 bid from 128.7 on Monday.

Ford's convertible preferred paper due 2032 likewise firmed to 42.4 bid on Tuesday from 40.25.

The junk, bank and convertible paper moved up as Ford announced that for the month of December, total company sales were 184,655, up 32.8% from 139,067 in the same period last year.

Total Ford, Lincoln and Mercury sales for the month were 179,017, up 33.5% from 134,114 last year.

Car sales for the month were 61,195, up 42% from 43,087 in December 2008.

And, total truck sales for the month were 117,822, up 29.4% from 91,027 last year.

Also on Tuesday, Ford released full year 2009 results that included total sales of 1.682 million, down 15.4% from 1.988 million in 2008.

Ford, Lincoln and Mercury sales for the full year were 1.621 million, down 15.4% from 1.915 million in the previous year.

Car sales for the full year were 595,671, down 11.4% from 671,965 for full year 2008.

And, truck sales for 2009 were 1.025 million, down 17.5% from 1.243 million last year.

"Ford's plan is working," said Ken Czubay, vice president, U.S. Marketing Sales and Service, in a news release. "Customer consideration continues to grow for our high-quality, fuel-efficient vehicles. In 2010, we will introduce an even higher number of new products, giving customers more reasons to drive one."

GM gains, even amid sales drop

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 gain ½ point to 29¾ bid, 30¾ offered.

A market source at another desk pegged the long bonds up a full point, at 30 bid.

The bonds rose even as GM reported a 5.7% decline in December sales from a year ago. However, that was a smaller decline than the 9% area downturn that Wall Street had been expecting, and was largely due, GM said, to a slowdown in fleet sales, which the company is trying to lessen anyway, feeling it is the least lucrative sales area and undermines the resale value of used GM cars and trucks.

Still, for the year, GM posted a 30% sales drop.

ResCap rally runs its course

A trader said that Residential Capital LLC's bonds were "pretty quiet today" - in contrast with the scene on Monday when the Minneapolis-based mortgage lender's bonds firmed smartly on the news that corporate parent GMAC would put a large portion of the $3.8 billion -- about $2.7 billion of it, to be exact - into the sagging mortgage company.

'It looks like they had the big rally [Monday], when the 9 5/8% notes went from prior levels in the low 80s to around 91 during the opening, and then up to 94 bid, 95 offered by the end of trading on Monday, "and that's pretty much where they were today."

GMAC held a Tuesday conference call, during which company executives declared that it gained additional flexibility to explore strategic alternatives for ResCap by undertaking a series of capital and strategic actions that were announced last week.

Michael A. Carpenter, chief executive officer of GMAC, said that actions taken at ResCap included the reclassification of some international mortgage assets and businesses, as well as some domestic mortgage assets, from held-for-investment to held-for-sale.

Speaking during Tuesday's call, GMAC chief financial officer Robert Hull said the company believes the capital support is "sufficient for the time being to fund ResCap's needs."

However, Carpenter also acknowledged that GMAC is "very much aware that ResCap is a drain" and has been considering alternatives for it since he joined its board of directors about six months ago.

According to the CEO, GMAC looked at eight alternatives for ResCap, including a bankruptcy and partial bankruptcy, and concluded that the capital and strategic actions taken were the right course of action to benefit all of its stakeholders.

Smurfit-Stone, Six Flags set exit loan meetings

Back in the bank debt market, sources said that Smurfit-Stone Container Corp. is currently looking at Jan. 13 as the date to hold a bank meeting for its proposed $1.2 billion six-year term loan.

As was previously reported, price talk on the term loan is Libor plus 500 basis points with a 2% Libor floor.

There is no talk on an original issue discount for the term loan as of yet, the source continued.

JPMorgan, Deutsche Bank and Bank of America are the lead banks on the exit financing deal.

As part of its exit facility, the company also intends to get a new revolver. The size of that revolver is still to be determined based on what banks commit to the transaction, the source added.

Smurfit-Stone is a Chicago-based manufacturer of paperboard and paper-based packaging, currently restructuring under Chapter 11.

Six Flags Inc. - also in reorganization -- is meantime scheduled to hold a bank meeting on Thursday to launch its proposed $830 million exit financing credit facility, according to a market source.

JPMorgan, Bank of America, Barclays and Deutsche Bank are the lead banks on the deal, with JPMorgan the left lead.

The facility consists of a $150 million five-year revolver and a $680 million six-year term loan, with both tranches talked at Libor plus 425 basis points with a 2% Libor floor, the source said.

The term loan is being offered at an original issue discount of 99, and the revolver is being offered with a 2% upfront fee, the source continued.

Six Flags is a New York-based regional theme park company.

-Jennifer Lanning Drey contributed to this report

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