Distressed market firms; Swift bonds retreat; ResCap, GMAC rally; Quebecor World up

By Stephanie Rotondo

Portland, Ore., Feb 25 - Monday's distressed bond market was deemed slightly firmer, though trading volume continued to be muted.

"Everything is higher," a trader said. "People are much happier. The world is a better place."

There was no real reason for the positive feelings, though some investors might have been feeling optimistic as bond insurers Ambac and MBIA had their ratings affirmed.

In the higher-flying environment, Montreal printing and publishing house Quebecor World Inc.'s bonds very slightly edged their way upward. There was no news to act as a catalyst for the debt, leading some market players to speculate that the overall feeling of the day was the reason for the move.

Rumors that the Federal Bureau of Investigation had raided Swift Transportation Co. Inc. spooked some investors away from the Phoenix-based trucking company's debt. Both the bonds and term loan retreated, though it turned out that the company was not a target of an investigation.

Residential Capital LLC and GMAC LLC saw their bonds rallying after decreasing slightly in the previous week on a ratings downgrade. Still, the market remains concerned about how long the parent will support its floundering child.

Quebecor notes edge up

Quebecor World paper inched - or perhaps centimetered - upward during the session, though the gains were nothing "dramatic," a trader said.

One trader quoted the 6 1/8% notes due 2013 at 45.5 bid, 46.5 offered, which he said was "not up dramatically."

Another trader placed the debt "about where it has been, maybe up slightly," the 2013 issue at around 46.

Another source called the bonds up almost a point around 46.5.

There was no news to prompt the movement. However, traders across the board agreed that the general marketplace was firmer on the day, which could have indirectly benefited the name. Quebecor did announce that it had formed a restructuring committee, which would oversee its efforts to reorganize the company.

In a somewhat related sector, Vertis Inc. paper continues to decline. A trader deemed the 10 7/8% notes due 2009 down a couple points into the mid-30s. Another source placed the bonds around 35.

Rumor hurts Swift paper

"Unfounded" rumors seemed to scare investors away from Swift Transportation's debt, a trader said.

The rumor centered on news reports that the FBI had executed search warrants at the company's Memphis driving school. However, according to those same reports, the company is not a target of an investigation.

Still, the company's 12½% notes due 2017, which had been moving up last week, slipped to 40 bid, 45 offered.

"It has dampened some enthusiasm in the bonds," the trader said.

The trucking company's term loan B also inched its way lower after the rumors surfaced.

The term loan B ended the day at 76 bid, 78 offered, down from 77 bid, 79 offered, a trader said.

Late in the day, Swift issued a press release to clarify the situation. In the release, the company explained that the law enforcement agencies were on site at the Swift Transportation commercial truck-driving school near Memphis and executed search warrants as part of an ongoing investigation that involves the issuing of Commercial Drivers Licenses at the company's facility.

"The Federal Bureau of Investigation and other agencies, are conducting an investigation concerning the issuance of commercial drivers licenses at our Tennessee facilities. According to the U.S. Attorney's Office in charge of the investigation in Tennessee and the FBI, Swift is not a target of the investigation. We do not expect this investigation to cause any disruption of our business and we intend to fully cooperate with the FBI and any investigating agency," said Dave Berry, spokesman for Swift Transportation, in the release.

ResCap, GMAC bonds rally

Residential Capital's bonds were only slightly worse last week after Standard & Poor's downgraded the mortgage lender, as well as its parent, GMAC LLC.

But the bonds recovered slightly, one trader said, during Monday trading. He pegged the 5.65% notes coming due in June 2008 at 89 bid, 90 offered, up a point.

However, another source called the debt unchanged, its 6 7/8% notes due 2015 in the high-50s, around 58. Yet another source agreed that the debt was unchanged, the 6½% notes due 2013 at 58 bid, 60 offered.

A trader saw corporate parent GMAC LLC's 8% bonds due 2031 unchanged at 79 bid, 80 offered, while another saw the 8% notes up a point at 79.5 bid, 80.5 offered.

GMAC has posted significant losses recently due to the troubles facing its ResCap offspring. ResCap began to see its foundation crumble last year amid the subprime mortgage crisis.

The recent downgrade came as the market began to speculate - again - how much support GMAC would continue to give the faltering business. Some say that Cerberus Capital Management, which holds a majority share of GMAC, will not want to keep the lifeline going. Cerberus is also a majority holder of Chrysler, which is facing issues of its own as well.

In the rest of the sector, Countrywide Financial Corp.'s bonds were unchanged to up half a point, with the 6¼% notes due 2016 steady at 85 bid, 86 offered, while its 3¼% notes coming due this May were 1.5 points better at 97 bid, 98 offered.

Abitibi, Tembec continue to fall

Forest products companies continue to be under pressure, traders reported.

There was "some activity" in Abitibi Consolidated Inc., also known as AbitibiBowater, a trader said. He called the bonds unchanged, its 6% notes due 2013 at 58 bid, 59 offered.

However, another trader saw the bonds continue to fall, with the 6.95% notes coming due on April 1, 2008 at 91 bid, 93 offered, down from 93.5 bid, 94.5 offered, and its 5¼% notes coming due in June 2008 at 89 bid, 91 offered, down from 92 bid, 93 offered. Its 8.85% bonds due 2030 were half a point lower at 52.5 bid, 54.5 offered.

The trader also saw sector peer Tembec Inc's 8 5/8% notes due 2009 lower by 2 points at 29 bid, 31 offered. But another market source saw Tembec's 8½% notes due 2011 up a point at 33.

Another trader saw the AbitibiBowater 6.95% notes at 91 bid, 92 offered and the 5¼% notes at 88.75 bid, 89 offered, both "slightly weaker" from Friday's levels. The trader noted what Fitch Ratings had to say about the credit when it recently downgraded it - that the company's "ability to refinance its obligations under current credit conditions could be difficult."

At another desk, the company's 7½% bonds due 2028 were down a point to the 49 area, while its 6½% notes due 2013 were off half a point to around 66.

However, another trader saw the old Bowater bonds better by about 2 points across the board, with its 7.95% notes due 2011 at 72 bid, 73 offered; the old Abitibi part of the debt, he said, was unchanged on the day.

Broad market mostly firmer

Retail names were mixed during the session, with Blockbuster Inc.'s 9% notes due 2011 "a little higher," but not very active, at 81.5 bid, 82 offered and Bon-Ton Stores Inc.'s 10¼% notes due 2014 unchanged around 67.5, but more active.

Blockbuster will hold a conference call on March 6 to discuss its fourth-quarter results.

Community Health Systems' bonds were seen better, its 8 7/8% notes due 2015 at 98.25 bid, 98.75 offered.

Idearc Inc.'s 8% notes due 2016 continue to be active, though they closed the day unchanged around 68.

Gaming names were also somewhat firmer. Trump Entertainment Resorts Inc.'s 8½% notes due 2015 ended the day around 70, while Station Casinos Inc.'s 6½% notes due 2014 ended at 68.

"Those were up half a point to a point," a trader said of Station's various issues.

Trump Entertainment will hold its quarterly conference call on March 5.

Spectrum Brands Inc.'s 7 3/8% notes due 2015 were seen half a point better at around the 65 level.

Tribune Corp.'s 4 7/8% notes due 2010 gained nearly 2 points to the 56 level.

Sara Rosenberg and Paul Deckelman contributed to this article.

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