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CDS Flow Summary - Visteon bucks Ford,GM tightening trend
Informa Global Markets - CDS Morning Insight (US) (November 1, 2006)

Parts makers generally followed the lead of the auto manufacturers and particularly profited on the way up when Ford and General Motors were pushing out new products with a fury, but tend to slip further on the way down. Parts maker Visteon is definitely an example as it will now cut 900 employees and its ratings were cut deeper into junk. S&P gave the firm a B rating from B+ on its weaker than expected cash flow caused by production cuts. Visteon's loss narrowed to USD177mln from USD207mln, but it warned on the rest of 2006 and 2007. This type of warning sent its default wider to a mid of 520 intraday, but gained back some ground to close off its wides at 495/510. This is still out from 485/495 Monday.

Though it is indeed a dim picture for Visteon, you would not know it by the way the auto benchmarks performed. The firms are due to report sales results for the month of October tomorrow. Default in challenged Ford Motor Co was active with dealing seen down to 580/590 from 595/605. Trade occurred in Ford Motor Credit at 360, but levels finished out even better at 356/360 (D/D in from 360/365). Ford has been touting its expansion into China, which could help its default. Its recovery swaps, which tend to trade by appointment, had a market today of 45/53, dealers say. General Motors was at 450/458, in from 460/470. GMAC was at 148/158 on active trade at that level, in from 150/155.

Earnings news in other sectors was also impactful as Eastman Kodak tightened in default to 215/228 from 227/237. Kodak said it had a cash balance of USD1.1bln and it was on track with its digital products. Kodak posted a narrower loss for Q3 at USD37mln, from USD914mln.

Travel name Royal Caribbean reported a drop in profit with net income at USD345.4mln from USD374.7mln. The firm also cited higher fuel costs. 5y USD CDS was at 100/105, in, however, from 105/110. Other names that tightened Bombardier eased to 240/250 from 245/255. Goodyear Tire tightened to 365/370 from 377/380.

In financial names, insurer and LBO name UnumProvident was wider at 55/65, from 50/60. In retail, Sears Acceptance was left at 87/94.

Kathleen Fitzpatrick Hoffelder



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