General Motors Bonds Surge on Kerkorian's Increased Stake, While Calpine and Auto Parts Sectors Decline

Strategic Insights -

Billionaire investor Kirk Kerkorian's significant investment in General Motors Corp. sent the company's bonds trading up last week, with some analysts hoping that his involvement will inject efficiency into the struggling auto giant. Meanwhile, Calpine Corp.'s bonds plummeted amidst controversy over management and conflicts with lenders, and the auto parts sector, including Dana Corp. and Delphi Corp., saw prices on their bonds fall due to credit rating downgrades and a weakening automotive sector.

Key Takeaways:

  • General Motors Corp.'s bonds traded up last week on the back of news that billionaire investor Kirk Kerkorian boosted his equity holdings in the company by $13.1 million, bringing his stake to 9.53% of total shares.
  • Many of General Motors Acceptance Corp.'s bonds traded up three points to the high 80s and low 90s last week.
  • Qwest Communications Corp. announced a partnership with Microsoft Corp. to establish voice-over-Internet protocol (VoIP) for business customers, sending its 7.25% notes due 2008 up four points.
  • Fedders Corp. reached an agreement with holders of its 9.875% notes due 2014 for a waiver of default on the notes, which traded up 3.125 points.
  • Calpine Corp.'s bonds tumbled last week amidst controversy over management and conflicts with lenders, with many of its bonds falling between five and nine points to trade as low as the 60s.
  • Dana Corp. and Delphi Corp., two major auto parts suppliers, saw prices on their bonds fall last week due to credit rating downgrades and a weakening automotive sector.
  • Wilbur Ross of WL Ross & Co., a distressed investor, expressed interest in the auto parts sector.
  • Dana's 7% notes of 2028 fell 6.875 points to 79.25, and Delphi's 6.55% notes fell 9.438 points to 71.938.

Statistics:

  • $13.1 million: amount by which Kerkorian increased his stake in General Motors Corp.
  • 9.53%: Kerkorian's stake in General Motors Corp.
  • 3 points: amount by which many of General Motors Acceptance Corp.'s bonds traded up.
  • 99.625: trading price of Qwest's 7.25% notes due 2008.
  • 3.125 points: amount by which Fedders Corp.'s 9.875% notes due 2014 traded up.
  • 60s: trading range of many of Calpine Corp.'s bonds.
  • 6.875 points: amount by which Dana's 7% notes of 2028 fell.
  • 9.438 points: amount by which Delphi's 6.55% notes fell.

Sources:

  • High Yield Report and SourceMedia, Inc.
  • http://www.highyieldreport.com
  • http://www.sourcemedia.com