Pied Piper GM leads autos higher; XM, Affinion, Glatfelter talk deals; funds see $147 million outflow

By Paul A. Harris

St. Louis, April 20 - General Motors Corp. was "the Pied Piper that led the whole market higher," in the words of one trader, after its earnings beat Wall Street expectations.

Meanwhile the primary market returned to its post-Easter lull which had been briefly broken on Wednesday. On Thursday no new issues were priced and no roadshow starts were announced.

And the negative news with regard to the flow of cash in and out of the high-yield mutual funds continued as AMG Data Services reported a $147.2 million outflow for the week to April 19.

It follows the previous week's $151.5 million outflow.

The source added that AMG reported year-to-date flows for funds that report on a weekly basis of negative $1.55 billion.

It means the past five weeks have seen two inflows and three outflows after six straight weeks of outflows, dating back to early February. Over the last 11 weeks, net outflows have totaled $1.18 billion, according to a Prospect News analysis of the AMG statistics.

Counting the latest week's result, inflows have now been seen in four weeks out of the 16 since the start of the year against 11 outflows, and net outflows have totaled $1.55 billion in that time.

The figures exclude distributions and count only those funds that report on a weekly basis.

A trader, mulling the latest negative flow number from AMG, characterized it as a "slow leak," and added: "It's kind of confusing because the market continues to be well bid, but funds flows are decidedly negative on the year."

The trader remarked that the high-yield asset class remains notably liquid.

Nevertheless, the source allowed, the negative flows from the high-yield mutual funds cannot be ignored altogether

"If you also consider that interest rates are due to go higher the high-yield could weaken up a bit, especially going into the slow summer months," the trader said.

GM heads upward move

Although GM seems a curious candidate for such a designation, a trader nevertheless characterized the troubled auto maker as the Pied Piper and said its gains prompted positive moves across high yield on Thursday.

In junk and throughout most of the capital markets GM was the focus.

Even though the troubled Detroit auto maker suffered its sixth successive quarterly loss, its revenue rose during the first quarter of 2006 and traders saw GM's bonds firm on the news.

They maintained that the company's earnings report seemed to beat the Street's expectations.

Although it suffered its sixth successive quarter of red ink at $323 million, or $0.57 per share, the first quarter of 2006 was actually an improvement from the 2005 first quarter when the company lost $1.3 billion, or $2.22 per share.

And the auto maker reported that its revenue rose 14.1% to a record $52.2 billion in the first quarter of 2006.

An investor said Thursday morning that GM bonds and bank loans had traded up 1 to 1½ points in Europe, and ½ to ¾ point in the United States, and added that the initial reaction seemed to be that the earnings report was slightly better than expected.

"They beat on the revenue side, the expenses were slightly better, and they beat on the bottom line, a trader said.

"They're still losing money but the bonds were up."

This source said that the company's 8 3/8% bonds maturing in 2033 were going out at 73.50 bid, 74 offered, up about 1.25, but a quarter of a point off from the highs of the day.

Slightly earlier a market source spotted the 8 3/8% due 2033 at 73.625 bid, 74.125 offered. This source also said that the General Motors Acceptance Corp. 8% notes due 2031 were at 94.25 bid, 94.75 offered, up a quarter.

However another trader, speaking well after the Thursday close, said that GM "did improve slightly," spotting the 2033 bonds closing at 73.50 bid, 74 offered, up half a point, and characterized the move as "a benign response."

The trader added that the auto sector "definitely did better than GM core paper," although the source conceded that autos were probably buoyed by improving fundamentals at GM.

The auto sector rally

This source marked Dura Automotive Systems Inc.'s 9% due 2009 up two points on the session, closing at 56.50 bid, 57.50 offered.

Another trader, specifying that the auto supply sector was up 1 to 1½ points on the day, said that Delphi Corp.'s 6½% notes due 2013 went out at 66.75 bid, 67.75 offered, up a point after having finished Wednesday at 65.75 bid, 66.75 offered.

In fact, said the trader, all Delphi paper was up a point.

Less dramatic was the debt of parts supplier Visteon Corp., the trader added. Visteon's 7% notes due 2014 finished at 77.75 bid, off from the day's high of 78.25, but still higher than Wednesday's close of 77.50 bid.

"They were up a quarter, closing-day to closing-day, but off their intraday high," the trader remarked.

Another source, describing all the auto supply companies as up a half to a full point, along with equities, marked Delphi's 6.55% notes due 2006 at 68.75 bid, 69.75 offered, up about 0.75.

This source also saw Lear Corp.'s 8.11% notes due 2009 at 96.50 bid, 97.25 offered, firmer on the day.

Ubiquitel gains on acquisition news

Thursday's news that Sprint Nextel Corp. and UbiquiTel Inc. have an agreement for Sprint Nextel to acquire UbiquiTel for approximately $1.3 billion, including the assumption of about $300 million of net debt, sent Ubiquitel's paper higher.

According to the press release, 452,000 PCS wireless users will become Sprint Nextel subscribers when the deal is completed, and it added that the acquisition extends Sprint Nextel's direct service territory to an additional 8.3 million people in nine states.

A trader spotted Ubiquitel's 9 7/8% notes due 2011 at 110.25 bid, 110.75 offered, up half a point.

However Sprint Nextel's 12% due 2009, at 107.25 bid, 107.75 offered, and it 8½% paper due 2012, at 107.375 bid, 107.875 offered, were unchanged.

Recent issues mostly unchanged

A market source marked most of the recently priced junk issues unchanged on the Thursday session.

Chemtura Corp.'s new 6 7/8% notes due 2016 (Ba1/BB+) were at 100 bid, 100.50 offered on Thursday. The company priced an upsized $500 million issue of paper at 99.452 on Wednesday to yield 6.95%.

Meanwhile a trader, specifying that Chemtura priced Wednesday but didn't really start trading until Thursday morning, said the new bonds "locked in around 100.25," at 100.125 bid, 100.375 offered.

The trader commented that the deal had been oversubscribed, upsized and slightly tightened.

Elsewhere a market source spotted Mariner Energy, Inc.'s new 7½% notes due 2013 at 98.50 bid, 99 offered. That deal also priced Wednesday in an upsized $300 million issue, at 98.676 to yield 7¾%.

A trader, meanwhile, saw the new Mariner Energy paper trading 98.25 bid, 98.75 offered, "hanging right in the meat of it."

A market source saw the Avis Budget Car Rental LLC 7 5/8% notes due 2014 at 102.50 bid, 103 offered, up a point on the day.

Meanwhile the Avis Budget 7¾% notes due 2016 were at 101.50 bid, 102 offered, unchanged.

Those issues were part of a $1 billion three-part senior unsecured notes transaction (Ba3/BB-) that priced on April 11. Both were priced at par.

Everything up with autos

A trader who marked the broad market up about half a point on the day said that the trend in junk was up, with everything moving with GM.

"It cooled off toward the end but at the beginning it was moving north pretty solidly," the trader said.

Noting that away from autos the "trend is really firm," the trader added: "I think the market is expensive in general, but nobody wants to sell anything because there is nothing to put cash into."

Another trader said that Charter Communications' 11% bonds closed at 85.25 bid, 86.25 offered, after trading as high as 87 bid, and marked the paper up ¾ point on the session.

Meanwhile Intelsat Ltd.'s 7 5/8% notes due 2012, the holdco paper, closed a little higher at 84.50 bid, 85.50 offered, up a point.

Rotech takes a tumble

News that Rotech Healthcare Inc.'s new reimbursement rate for its compounded budesonide from Medicare would reduce the company's annual revenues for 2006 by approximately $30 million and would reduce fully diluted earnings per share for 2006 by approximately $0.68, sent its bonds tumbling, a trader said.

Rotech's 9½% bonds due 2012 were knocked down "around 10 points" to 93 from 103, the trader added.

Talking the deals

The only news to emerge from the primary side in Thursday's session was price talk on a trio of offerings expected to price by the middle of next week.

XM Satellite Radio Holdings gave price talk on its $600 million two-part offer of senior notes (Caa2) on Thursday.

Talk is 9 3/8% to 9 5/8% on the eight-year fixed rate notes and three-month Libor plus 437.5 to 462.5 basis points on the seven-year floating-rate notes.

Tranche sizes remain to be determined.

UBS Investment Bank, JP Morgan, Bear Stearns & Co., Citigroup and Credit Suisse are joint bookrunners.

Late Friday a market source said that the deal was heard to be going well with lots of different accounts playing in it.

Elsewhere Affinion Group talked its $350 million offering of 9.5-year senior subordinated notes (Caa1/B-) at 12%.

Credit Suisse and Deutsche Bank are the bookrunners for the deal, which is expected to price Friday.

And P.H. Glatfelter Co. talked its $200 million offering of 10-year senior unsecured notes (Ba1/BB+) at 7¼% to 7½%.

The Credit Suisse-led offering is expected to price on Tuesday.

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