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Delphi bonds hit by job cut, earnings news

Delphi bonds hit by job cut, earnings news < News < Bet On Markets

CHICAGO (AFX) — Investors soured on bonds issued by leading auto supplier Delphi Corp. Friday after the company announced job cuts and said it expected a dent in its bottom line in the fourth quarter and next year.

Delphi’s 6.5 percent note due in August 2013 was trading at a spread of 260 basis points to a comparable-maturity Treasury note. The spread, or difference in yield, was wider by 8 basis points on the day and by 30 basis points on the week, according to MarketAxess. A basis point equals one-hundredth of a percentage point.

Spreads widen when investors demand higher yields in compensation for perceived risk that a company may default on its debt. Yield spreads narrow when that risk lessens.

Delphi’s share price fell to its lowest in more than a year earlier Friday, at $8.12.

The company said it would cut 5 percent of its workforce and predicted 2005 revenue at $28.5 billion to $29 billion, leading to a loss of around $350 million including charges from workforce reduction. Automaker bonds dominated the most actively traded issues in the corporate bond market, with spreads widening.

General Motors’ 6.750 percent note due in December 2014 drew the greatest volume. It traded at a spread of 267 basis points in afternoon action, according to MarketAxess, wider by 5 basis points from Thursday and wider by 22 basis points from one month earlier.

Ford’s 7 percent note due on October 2013 was also actively traded. It stood at a spread of 198 basis points, wider by 5 basis points on the day, by 12 basis points on the week and by 2 basis points on the month.

GM’s 8.375 percent bond due in July 2033 was trading at a spread of 340 basis points, wider by 10 basis points on the day and by 30 basis points from one week earlier.

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