NXP weighed by earnings; WaMu mixed, E*Trade unchanged; Ford uneven as Tracinda unloads shares

By Stephanie N. Rotondo

Portland, Ore., Oct. 21 - It was a mixed bag in the distressed bond market Tuesday, as the earnings season got under way.

NXP BV, the Dutch semiconductor maker, posted its earnings before the market opened. The company's bonds reacted to the decline in sales - and a warning about the next quarter - by falling as well.

Traders gave mixed reports on whether Washington Mutual Inc. finished the session better or worse. Some saw the debt better, while others saw it worse as chatter continued that the FDIC might be eyeing the bankrupt company's cash deposits. E*Trade Financial Corp.'s bonds were meanwhile unchanged, as the market had not yet reacted to the company's earnings release.

Ford Motor Co. also ended mixed on the news that Tracinda Corp. had unloaded some of its shares in the automaker at a loss. Some sources deemed the debt better, while others saw the structure continuing to decline.

NXP weighed by earnings

Chipmaker NXP saw its bonds slip some during trading after the Dutch company released its third-quarter earnings.

A trader quoted the 9½% notes due 2015 at 42.5 bid, 43.5 offered, down from 44. He noted that some trades got as low as 41 before coming back to the closing levels.

Another trader pegged the issue at 42 bid, 43 offered, up half a point intraday, but down 1 point from Monday.

Sales fell 4.2% from the 2007 third quarter to $1.34 billion. That number represented a 1% increase from the second quarter of 2008. A decline in demand resulted in a 10% drop in factory loads to 68% from 78% in the second quarter.

NXP has responded to the softer economy by restructuring. The plan to cut costs by $550 million a year will result in more than 4,000 lost jobs. However, as the company continues its efforts, NXP expects to see sales fall 8% to 14% in the fourth quarter.

"The financial crisis and semiconductor market conditions have caused a rapid deterioration of demand towards the end of the third quarter especially in sectors like automotive and consumer," Frans van Houten, chief executive, said in a press release. "We are convinced of the necessity to act decisively to lower our cost base and to prepare for a difficult market."

But despite the slowdown, Standard & Poor's left its rating on the company unchanged at B-. The agency defended its position by noting that its cash position was adequate, as was its revolving credit facility, which is completely undrawn. S&P also noted that the company's restructuring efforts have helped to eliminate cash burn.

WaMu mixed, E*Trade unchanged

In the world of financials, traders gave mixed reports on Washington Mutual's senior holding company paper, which had fallen Monday on speculation that the FDIC might be eyeing the company's cash deposits.

One trader called the bonds, like the 4.20% notes due 2010, 3 points lower at 62.5 bid, 64.5 offered. But another said the bonds rebounded a tad to 65 bid, 66 offered.

The FDIC said in a court filing Monday that it might have "significant claims" against the bankrupt bank. In particular, the bank insurer wants to protect its position regarding $4.4 billion in deposits WaMu is seeking access to.

Meanwhile, E*Trade Financial's notes were deemed unchanged as the company posted its quarterly figures after the market closed.

Several market sources placed the 8% notes due 2011 around 75.

"They have been trading at this level for the past few days," one trader said. Another said that there had yet to be a reaction to the financial report.

"I just haven't seen anything in those for awhile," said another source.

The market was expecting a loss of 28 cents per share from the company. But the numbers came in above projections at a loss of 9 cents per share, or $50.5 million. That compared with a loss of 14 cents per share, or $58.4 million, the year before.

Elsewhere, a trader called First Data Corp.'s 9 7/8% notes due 2015 one of the more active issues of the day. The trader said the bonds opened weaker at 60 bid, 61 offered, only to come back to 62 bid, 63 offered, about unchanged.

Another trader pegged the paper at 62.75 bid, 63.75 offered, which he called "off a smidge."

Ford uneven

Investor Kirk Kerkorian and his company Tracinda Corp. announced that it had sold about $18 million of its equity stake in Ford Motor Tuesday. According to market sources, the news was a mixed bag.

One trader saw the Ford 5.80% notes due 2009 unchanged at 91 bid, 92 offered. But the benchmark 7.45% notes due 2031 were called a point weaker at 29 bid, 30 offered.

At another desk, the 7.45% notes were seen gaining half a point to 29.5 bid, 31.5 offered. Yet another trader placed the issue at 29.5 bid, 30.5 offered, up a point.

The company's term loan was also seen moving upward, closing 2 points better at 49 bid, 52 offered.

Tracinda said it sold the shares at a loss and was considering selling its remaining stake in the automaker as well. Still, the Dearborn, Mich.-based company said it remained committed to its restructuring plan.

"We remain confident in and focused on our plan to transform Ford into a lean global enterprise delivering profitable growth for all," the company said in a statement.

However, analysts were not as optimistic.

"Who needs the aggravation of trying to turn around a distressed company in a troubled industry in the middle of an economic downturn?" wrote Shelly Lombard, a Gimme Credit analyst, in a research report. "Ford has lost a potential source of liquidity, someone who could write a check for a few billion if it needed the capital."

In the rest of the autosphere, General Motors Corp.'s bonds were seen ending firmer.

A trader called the 8 3/8% notes due 2033 up 2.5 points at 26.5 bid, 28.5 offered, while another saw the bonds 3 points better at 29 bid, 31 offered. GM's GMAC LLC unit's 8% notes due 2031 were likewise 3 points stronger at 38 bid, 40 offered.

Broad market mixed

Sprint Nextel Inc.'s 6% notes due 2032 were called "pretty much flat from yesterday" at 62 bid, 63 offered.

A trader deemed Idearc Inc.'s 8% notes due 2016 "flat, maybe a little down," at 21.5 from 22 bid, 23 offered previously. But another called the bonds higher at 21.5 bid, 22.5 offered.

Rite Aid Corp.'s were "pushing up some," a trader said. He pegged the 9 3/8% notes due 2015 and the 9½% notes due 2017 around 40, from the mid-30s last week. He also saw the 7½% notes due 2017 at 62 bid, 62.5 offered, up from 58 bid, 59 offered.

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