AbitibiBowater slips on stake sale news; Ford, GM mixed after Friday bailout news; broad market better

By Stephanie N. Rotondo

Portland, Ore., Dec. 22 - As the short holiday week began, distressed bond traders said Monday was "as expected."

"As you can imagine, it's pretty quiet," said one trader. "Nothing was really going on."

Still, even though activity was light, the general tone was largely positive, as bonds moved higher despite a falling equity market.

AbitibiBowater Inc.'s bonds closed the day mostly lower on news that the company was looking to sell its stake in a hydroelectric utility. The company said it had an interested party, though it did not name the buyer. The sale is part of the company's effort to reduce debt.

Meanwhile, after Friday's momentum, Ford Motor Co. and General Motors Corp. seemed to lose some steam. Both companies' saw their term loans holding steady, but the corporate debt ended the day mixed at best.

The market will close early on Wednesday, Christmas Eve. The market will be closed on Thursday and will reopen on Friday. However, most market players are speculating that activity will be slim until after New Year's.

AbitibiBowater slips

AbitibiBowater bonds were unchanged to mostly lower on news that the company was selling its hydropower assets.

One source saw the 6½% notes due 2013 linked to Bowater at 13.5 bid, down 1.5 points. Another saw the 9½% notes due 2012 down as much as 8 points at 7.5 bid, 8.5 offered.

Elsewhere, Abitibi's 8½% notes due 2029 were unchanged at 7 bid, 8 offered, while the 8.85% notes due 2030 were also steady at 5.5 bid, 6 offered.

The Canadian-based papermaker said Monday it had entered into a preliminary agreement to sell its 75% stake in Ontario-based hydroelectric utility owner ACH LP for C$540 million. The company did not specify who the interested buyer was, but did note that the buyer would assume C$250 million of the partnership's debt.

The sale of the asset is part of the company's plan to unload its non-core assets and to reduce debt.

AbitibiBowater, which combined earlier this year, is also dealing with a possible delisting of its stock from the New York Stock Exchange.

Still, the company also said that is expects the fourth quarter of 2008 - along with 2009 - to be a better in terms of its bottom line.

"Despite lower volumes, as evidenced by our production curtailments, we expect a substantial improvement in financial performance in 2009 compared to 2008," David Paterson, chief executive officer, said in a statement.

Ford, GM mixed

Ford Motor and General Motors' term loans were steady following their Friday rise on the announcement of a government rescue plan, according to a trader.

Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 40 bid, 42 offered, unchanged on the day, the trader said. On Friday, the debt had risen by about 2 points.

And, General Motors, a Detroit-based automaker, saw its term loan quoted at 45 bid, 47 offered, also unchanged on the day. On Friday, the debt had risen by about 3 points.

But the bonds showed some weakness, traders said, as investors began analyzing what the recently announced bailout meant.

Ford's 7% notes due 2013 dropped more than 2 points to 49 bid, while its 5% notes due 2009 were perhaps a tad better at 73 bid, 74 offered.

Meanwhile, GM's financing arm, GMAC LLC, saw its debt end the day mixed. The 6 7/8% notes due 2012 fell 2 points to 39 bid, while the 5.85% notes due 2009 - which have actively gyrated all over the place for the past week or so - gained some to close at 88 bid, 91 offered.

Last week's improvement was attributed to President Bush's decision to give $17.4 billion in loans to the auto sector so as to rescue them from their current liquidity problems.

Under the rescue plan, $13.4 billion in loans will be available in December and January, with $9.4 billion of that going to General Motors and $4 billion going to Chrysler LLC. The remaining $4 billion in loans would come later, based on certain conditions.

In response to the news on Friday, General Motors said that the funds will allow for the acceleration of its aggressive restructuring plan, and that it plans to provide regular updates on its progress.

Ford had said that it was happy about the government's decision and that it won't be getting any of the funds because it does not face a near-term liquidity issue.

Still, the news might not have been as positive as it first seemed. In a research report, Credit Suisse downgraded GM's stock, calling it nearly, if not completely worthless as a result of the bailout.

Broad market mostly better

Washington Mutual Inc.'s senior holding company paper, like the 4% notes due 2009, were deemed better at 65 bid, 66 offered.

Nortel Networks Corp.'s floating-rate notes due 2011 were also somewhat better at 18 bid, 18.5 offered.

A trader said Charter Communications Inc.'s 8¾% notes due 2013 continued to be "one of the more active issues." He added that the bonds gained about 2 points to close around 57.

Stations Casinos Inc.'s 7¾% notes due 2016 also traded actively, the trader said. He thought they looked a "little lower" at 19 bid, 20 offered.

Sara Rosenberg contributed to this article.

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