Visteon Final Bond Recovery Price: 3 Cents On The Dollar

Market tests are useful as they best indicate just what is the real value of hundreds of billions of distressed securities stripped away from any unwarranted optimism and green shoot propaganda. Today's Visteon CDS Auction was just one such test. And if there was a way to grade the test, it would be an emphatic F: not so much for bankrupt Visteon which is already in the morgue, but for other comparable auto suppliers whose bonds and loans recently have seen overambitious PMs buying their debt as if every single credit instrument would be rolled into Taxpayer Capital LLC's Worthless Assets Fund. (One need only look at the stock price of LEA over the past 2 weeks to see the insanity going on with autosuppliers).

The final result: a jaw dropping 3 cent recovery on the Visteon CDS and 39 on the loans. I recently presented other auction clearing prices, which averaged about 10 for unsecured tranches. It is not surprising to see that the average price continues dropping aggressively: and this despite all the green shoots that the economy is experiencing, and despite Larry Kudlow's expectation for the recession ending in about a month.



Aside from the philosophical implications that the entire auto supply chain industry is basically insolvent if it were to be valued fairly, it is worth nothing that in this particular auction, it was Bank of America which almost single handedly took home the spoils, getting hit on $91 million worth of limit order at 3.375%: half the net open interest to sell of $180 million. Whether this was to cover prop exposure, or for clients, is unknown. However what is most amusing is Deutsche Bank's substantial interest... at 0.5 cents on the dollar.

For full details on the Visteon CDS auction, click here. Sphere: Related Content

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Smurfit CDS Auction Yet Another Opportunity For Free Money

Smurfit Stone's CDS Auction concluded at 2pm today with a final clearing price of 8.875, a whole 100 bps over the Inside Market Midpoint of 7.875. Whoever got hit - congratulations as the bonds were bid 9.5 post auction, an 7% immediate pick up.

The auction's final closing price was curious as this was the first time in ISDA auction history where the midpoint was lower than the final clearing price. The high final price was a factor of several significant bids at 8.875, most notably $100 million by Barclays which scooped up almost 80% of the entire $128 million auction. As the auction was relatively smaller than Nortel and of course Lehman, it may be not truly indicative of trending datapoints, nonetheless here are the conclusions. Barclays, JP Morgan, and Goldman are still the only truly active desks (and/or B/D with legitimate hedge funds clients that have the liquidity to put in limit bids). Deutsche Bank, Citi, UBS, BofA and Credit Suisse continue posturing, unable to provide any even remotely relevant bids and merely bidding for the sake of bidding, which is due either to lack of trade desk capital or no hedge fund accounts who they could convince to bid in context. Most amusing is Citi 100 million bid at 0.5 which doesn't even deserve a comment.

Final clearing price: 8.875

Weighted average limit price based on indicated notional and levels: 5.67
Sell limit orders total notional: $128.68 million
Total broker expressed bid notional interest: $1.1 billion
Bid Interest to Sell order ratio: 11.6%
Brokers expressing notional interest and limits (sorted by proposed limit price):

Bank of America: $2 @ 7.00
Barclays: $265 @ 8.31
Morgan Stanley: $122 @ 7.34
RBS: $27 @ 7.81
BNP Paribas: $2 @ 7
Goldman Sachs: $248 @ 4.45
JP Morgan: $158 @ 7.92
Credit Suisse: $2 @ 6.25
Deutsche Bank: $131 @ 2.63
UBS: $7 @ 7
Citigroup: $174 @ 1.23 Sphere: Related Content

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