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CDS Flow Summary - Ford weathers rating storm,Chrysler hurts
Informa Global Markets - CDS Morning Insight (US) (September 20, 2006)

Another round of rating attacks on Ford Motor Co managed to hit the firm but it was largely shrugged off. Market participants had been waiting for the "other shoe to drop" from the rating agencies and both S&P and Moody's did not disappoint by knocking Ford and financial arm Ford Motor Credit to B in the case of S&P and to B3 by Moody's. But with some of the uncertainty now cleared, default in the key auto benchmarks withstood the attacks. 5y USD CDS in Ford Motor Credit was left at 383/388, in from 383/393, while Ford Motor Co reversed back from Monday's widening of 710/725 to 700/710. Competitor General Motors was a touch wider at 550/560 from 545/560, while GMAC tightened to 185/190 from 190/195. But even though the benchmarks came through the ratings mark unscathed, parts makers were more stung by DaimlerChrysler slashing production. The US division, Chrysler, said it would cut production by 90K units in Q3 and 135K in the second half of the year. ArvinMeritor widened to 440/450 from 410/425, while Lear blew to 550/560 from 525/545. Default in Cooper Tire & Rubber remained wide at 440/460.

Away from autos, the roll to the new series 7 indices tomorrow for most of the indices with the exception of high yield, the DJ CDX NA HY6, kept participants' interest. According to one dealer yesterday, the market exhibited the "buy the rumor, sell the fact," mentality heading into the roll. Names that have been slated for deletion have had bid interest lately, which will likely be sold after the move. Cendant, for one, extended to 114/129 from 105/120. It will leave DJ CDX IG6. Also slated for cutting, Wendy's extended in 5y default to a market of 121/128 from 115/125.

Homebuilders, meanwhile, also weathered another downward trend in home sales. Lennar CDS was at 71/76 from 66/70. Pulte was at 69/74 from 64/68. Centex firmed to 69/74 from 55/60. Retail headliner Gap Inc continued to blow out again in default as LBO rumors persisted around Eddie Lampert. The firm extended Monday initially and blew wider today again to a mid of 110 from 106. In TMT, Motorola saw its CDS today at 27/29 from 27/31 Monday as it will be buying Symbol Technologies for USD3.9bln in cash. In separate rating actions, Dole Food remained on negative CreditWatch at S&P due to its products sold with spinach. An E. coli outbreak in the US extended its default to 525 from 500.

Kathleen Fitzpatrick Hoffelder



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