GM, Ford gain as Congress reopens talks; Pilgrim's senior paper rallies; Tronox slips on missed coupon

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Dec. 2 - General Motors Corp. and Ford Motor Co. were the noms du jour Tuesday, as the Detroit automakers made the trek back down to Washington.

The Big Three unveiled their business plans to Congress in an effort to secure federal aid. GM asked for $18 billion in funding, while Ford asked for only $9 billion. Still, the total monies the two companies asked for would equal more than the previously discussed $25 billion for all three carmakers.

Regardless, both GM and Ford saw their debt structures move upward during the session, despite deplorable sales figures for November.

Meanwhile, Pilgrim's Pride's Corp.'s senior debt rallied some Tuesday, though its subordinated debt did not fare as well. Traders were unsure what caused the opposite reactions, though some speculated that posturing or technicals might have played a role. Pilgrim's filed for voluntary bankruptcy protection on Monday.

Tronox Worldwide LLC announced Tuesday that it missed its interest payment on its 9½% notes due 2012. The bonds reacted by sliding some, but trading activity was slight.

GM, Ford gain

General Motors and Ford Motor saw their debt structures gain during the session, despite what one trader termed as "ugly" sales figures.

"They seemed firmer even with the bad sales numbers out," he added. The trader quoted Ford's benchmark 7.45% notes due 2031 at 26 bid, 27 offered, up 3 points.

Other traders also saw that issue trading around the 26 context. The 7% notes due 2013 were also called at least 3 points better at 46.5 bid, 47.25 offered.

GM's bonds also improved, though more modestly than Ford. A market source placed the benchmark 8 3/8% notes due 2033 at 21 bid, just a point better on the day. The source also saw GM's 7 1/8% notes due 2013 at 22.75 bid, 23.5 offered.

GM's financing arm, GMAC LLC, also posted gains, the 8% notes due 2031 up a deuce at 28 bid and the 6 7/8% notes due 2012 at 40 bid, up over 4 points.

Ford's term loan was quoted at 44.5 bid, 45.5 offered, up from Monday's levels of 41.75 bid, 42.5 offered, a trader said. GM's term loan was meanwhile quoted at 45 bid, 47 offered, up from 43 bid, 44 offered.

The debt of the automakers likely jumped up by a few points in trading as the companies outlined their bids for help to Congress that would hopefully return them to profitability.

"Talks were going to happen today. People [are] thinking they'll hear some sort of news on bailout or restructuring," a trader explained as to why the companies' debt was stronger.

On Tuesday morning, Ford submitted to Congress a comprehensive business plan and requested access to an up to $9 billion bridge loan in case the current economic crisis worsens or there is a bankruptcy of a major competitor, according to a company news release.

Ford also said that it hopes to complete its transformation without accessing the loan, being that it does not anticipate a liquidity crisis in 2009.

"For Ford, government loans would serve as a critical backstop or safeguard against worsening conditions, as we drive transformational change in our company," Alan Mulally, president and chief executive officer, said in the release.

Based on current business planning assumptions, Ford expects both its overall and its North American automotive business pre-tax results to be breakeven or profitable in 2011, excluding any special items.

Among other initiatives, the company is currently exploring strategic options for Volvo Car Co., including the possible sale of the Sweden-based automaker, and it has decided to sell its five corporate aircraft.

In addition, Mulally said, that if the company needs to access the proposed government bridge loan, he would work for a salary of $1 a year as a sign of his confidence in Ford's transformation plan and future.

GM also submitted its proposal to Congress on Tuesday, in which it asked for access to $18 billion in funds, with the hope being that repayments of the loans would begin as soon as 2011, according to a news release.

The company is requesting bridge loans of up to $12 billion to provide adequate liquidity levels through Dec. 31, 2009. An initial draw of $4 billion is expected to take place this month.

On top of the bridge loans, the company is requesting a $6 billion revolving line of credit to provide liquidity should a severe market downturn persist.

GM also said that it intends to significantly reduce the debt currently carried on its balance sheet, and it hopes to engage current lenders, bondholders and unions to negotiate the needed changes.

In addition, GM's chairman and chief executive officer offered to reduce his salary to $1 per year, following in Ford's footsteps.

Also on Tuesday, Ford and GM put out some pretty negative sales results for the month of November, although investors seemed to shrug off this information and focus on the rescue proposals.

Ford, for the month of November, reported total sales of 123,222, down 30.6% from 177,485 in November 2007. Total truck sales were 81,546, down 29% from 114,819 last year and total Ford, Lincoln and Mercury car sales were 37,272, down 31.5% from 54,439 last year.

And, GM delivered 154,877 vehicles in November, down 41.3% from 263,654 a year ago. The company's car sales were 58,786, down 44.1% from 105,077 last year and truck sales were 96,091, down 39.4% from 158,577 last year.

Still, according to a Gimme Credit LLC afternoon report, both Ford and GM fared about as well as their foreign competitors, such as Toyota.

General Motors is a Detroit-based automotive manufacturer. Ford is a Dearborn, Mich.-based automaker.

Pilgrim's seniors rally

Pilgrim's Pride's senior bonds regained some ground Tuesday, following the company's bankruptcy filing on Monday.

One trader, who called the poultry producer's story "interesting," pegged the 7 5/8% notes due 2015 at 18 bid, 19 offered, 2 points firmer. Another saw the senior issue move as high as 20, up from 15 bid, 16 offered.

However, the 8 3/8% notes due 2017 were seen falling to around 2 from 3 bid, 4 offered.

"With the bankruptcy filing, people are probably posturing in terms of what they think recoveries are," the second trader opined. He added that technicals, such as short covering or credit default swaps, might have also provoked the movements.

The Pittsburg, Texas-based company filed for bankruptcy Monday. High feed and low meat prices had weighed on the company's balance sheet. After three bank covenant waivers from its lenders - and months of speculation - Pilgrim's finally admitted that it needed to restructure.

But high feed prices have caused many companies to struggle, like Tyson Foods Inc. Even ethanol producers like VeraSun Energy Corp. trembled as the price of corn skyrocketed. Flooding in the Midwest was the culprit behind the increasing prices, as a good portion of the region's corn crops were destroyed in the disaster.

Tronox misses coupon

Tronox Worldwide missed its coupon payment due Monday and, as a result, the bonds were seen falling come Tuesday.

A trader quoted the 9½% notes due 2012 at 7 bid, 12 offered, while another said the market was "probably" 8 bid, 10 offered. The second trader added that there was only one trade during the day at 8.5.

The titanium dioxide pigment maker failed to pay its $16.6 million interest payment and instead entered into the 30-day grace period. If the company does not pay up during that timeframe, it would be considered a default and the bonds could be accelerated.

Under a waiver from its bank lenders, Tronox has until Friday to correct defaults under other credit agreements or secure another waiver.

The company is reportedly looking into its options. Should it find no other way to restructure, Tronox could file for bankruptcy.

Broad market mostly better

Washington Mutual Inc.'s bonds traded up, traders reported. One trader called the senior holding company paper, like the 4% notes due 2009, a few points better at 59.5 bid, 60.5 offered. The senior bank paper also rallied, the 3.28% notes due 2009 at 25.5 bid, 26.5 offered.

A trader saw Primus Telecommunications Group Inc.'s 14¼% notes due 2011 trade down to 19.5 bid, 20 offered. He noted that the last trade in that issue was at 77.

"That's not good," he said. "Looks like they are headed for a bankruptcy."

NXP BV's debt "seemed actively quoted first thing this morning," the trader continued. He called the bonds better on the day, the 7 7/8% notes due 2014 at 32 bid, 34 offered and the 9½% notes due 2015 at 19 bid, 20 offered.

Sprint Nextel Corp.'s 6% notes due 2016 were also seen moving higher, with one trader placing the bonds around 59.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.