Freescale jumps on asset sale news; retailers moving higher; Ford racks up gains, GM retreats again

By Stephanie N. Rotondo

Portland, Ore., April 9 - The distressed bond market ended the abbreviated week on a positive note and some traders saw more action during the session than they had expected.

"There is lots of volume," one trader said about lunchtime, leaving only two hours left in the official trading day. "Everyone is trying to get in before the end of the day."

The trader added that "everything is 2 to 4 points better, I would say."

Freescale Semiconductor Inc.'s bonds jumped a good 5 points on the day, traders reported. The bump up came on the back of news that the company was selling an asset to a Chinese company.

Meanwhile, retailers experienced a bit of a rally, as sales reports for March began to come out. Michaels Stores Inc. and Dollar General Corp.'s bonds improved, as well as Macy's Inc. and J.C. Penney Co. Inc., on the higher end of the credit scale.

As per usual, Ford Motor Co.'s bonds continued their climb higher as the company denied it was interested in Chrysler LLC assets. General Motors Corp.'s notes were once again retreating on news that the company had come up with a new - not better - proposal for bondholders.

The bond market will be closed on Friday in observance of Good Friday.

Freescale jumps on asset sale

Freescale Semiconductor's bonds gained a good 5 points on the day on news that Chinese company Cosun had bought some of the company's assets.

A trader quoted the 9 1/8% notes due 2014 at 13 bid, 14 offered, up from 9 bid, 10 offered at the beginning of the week. He also saw the 8 7/8% notes due 2014 at 27 bid, 28 offered, up from opening levels around 25 and closing levels on Wednesday of 22 bid, 23 offered.

Another source also saw the 8 7/8% notes around 28, calling those 5 points firmer.

At another desk, Freescale's 10 1/8% notes due 2016 were deemed more than 2 points better at 22 bid, 24 offered.

Cosun, the parent company of Qiao Xing Mobile Communications Co., Ltd., plans to purchase Freescale's wireless communication division. No price was given, but Cosun is reportedly set to acquire intellectual property, about 1,600 research and development employees and some equipment.

Freescale is an Austin-based manufacturer of embedded semiconductors.

Retailers moving higher

Retailers "rallied some," a trader said, as monthly sales numbers for March started to trickle out.

A trader saw Michaels Stores' 10% notes due 2016 moving up to around 51, while another saw that issue ending around 50. The second source also saw the 11 3/8% notes due 2016 at 39.5.

On the higher-rated end of the spectrum, Dollar General's 10 5/8% notes due 2015 moved up to "101 and change," the first trader said.

But it was Macy's and J.C. Penney that really moved, traders reported.

The first trader saw Macy's 5.35% notes due 2012 at 83, calling that "up a couple." Another trader echoed that level, adding that it was "definitely up a couple of points."

Meanwhile, J.C. Penney's 7.65% notes due 2016 gained 1 to 2 points to close at 81.

The International Council of Shopping Center's monthly index reading saw same-store sales falling 2.1% in March. However, that included a 3% decline due to Easter and the calendar shift.

"The overall tone for March was actually stronger than the reported sales performance," said Michael P. Niemira, ICSC chief economist and director of research, in a statement. "Sales performance was dampened due to several factors, two of which were calendar related; the first being a calendar-month shift that caused there to be one less Saturday in March compared with last year and the second being that Easter falls three weeks later this year, on April 12, as opposed to March 23 last year.

"These shifts created an unfavorable month-over-month comparison with March of 2008," he continued. "If we adjust for the calendar shifts sales for March were stronger than reported, in fact, up about 1%."

The council forecasts April sales will be flat to up 1%.

Macy's and J.C. Penney both released same store figures for the month. Macy's saw sales falling 9.2% at stores open at least one year, slightly below analysts' expectations of a 9.3% decline. For the four weeks ending April 4, total sales dropped 9.8% to $1.931 billion.

Over at Penney's, same store sales declined 7.2%, better than the 10.5% decline that had originally been predicted.

Furthermore, Penney's forecast a narrower-than-expected loss for the first quarter of 2009, predicting a 5-cent to 10-cent loss. Previously, the company had placed guidance at a loss of 20 cents to 30 cents.

Ford racks up gains, GM slides

Ford bonds continued to gain strength, just as rival General Motors continued to slide.

A trader said the "long Fords" - the benchmark 7.45% notes due 2031 - moved up 3 to 4 points to "42-ish."

"So those have come a long way," he noted.

Another source pegged the 7% notes due 2013 at 70 bid, a half-point gain day over day.

Yet another source placed the 7.45% notes at 39.5 bid, 41.5 offered, calling that up more than a point.

That source also saw GM's benchmark 8 3/8% notes due 2033 at 8 bid, 10 offered, a 2-point loss.

Another trader called Ford's benchmark issue 3 points firmer at 39 bid, 41 offered, but saw GM's 7.20% notes due 2011 close unchanged at 11 bid, 13 offered.

On Thursday, Ford's president, Mark Fields, told reporters at the New York International Auto Show that the Dearborn, Mich.-based company had no interest in acquiring Chrysler - whether in full or in part - should the automaker be forced to file Chapter 11.

"We're focused right now on merging Ford around the world right now. We're focusing on Ford, so no," Fields said, according to Reuters.

Fields also reiterated the company's belief that it would not have to get access to emergency government aid. Earlier in the week, Ford said it reduced its debt by $9.9 billion.

"We do have a significant amount of liquidity and based on our assumptions ... we have no plans to access any of the emergency taxpayer funds," Fields said.

In GM-related news, the Detroit automaker is reportedly working on a new plan to take to bondholders. The company had originally offered bondholders 8 cents cash on the dollar, 16 cents on the dollar in new unsecured debt and a 90% stake in the reorganized company's equity.

But news reports indicate that the new revised terms will be far worse, with bondholders receiving no cash or new debt and as little as 10% to 20% of the new equity.

GM has until June to come up with a viability plan that the Obama administration can approve. The company was sent back to the drawing board last week after the administration said GM's proposal did not cut deep enough.

Broad market mixed

In the rest of the marketplace, Washington Mutual Inc.'s senior holding company paper, like the 4% notes due 2009, closed at 78 bid, 82 offered, while the subordinated issues, such as the 8¼% notes due 2010, ended at 50 bid, 53 offered.

American International Group Inc.'s 4 7/8% notes due 2012 closed unchanged at 43, according to a trader.

Sprint Nextel Corp.'s 6 7/8% notes due 2013 gained 3 points to end at 62 bid, 63 offered.

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