Delphi's bank debt dropped and bounced as approximately $50 million traded after Moody's Investors Service downgraded of General Motors debt. The company's revolving credit dropped to 95 1/2 from 97 before rebounding to 96. Its term "B" loan was trading flat in the 102-103 range.
Investors are concerned Delphi could be at risk of bankruptcy. On Aug. 5, the company, which used to be a subsidiary of GM, drew down $1.5 billion from its $1.8 billion revolving credit, prompting concern that the auto parts maker could be in financial trouble. The bank debt fell a point on news of the drawdown. The company said the drawdown was connected to the restructuring of its operations in the U.S.
Investors said Delphi was the only car company to be affected by the GM downgrade. "The rest of the auto names are liquid," said one trader. "People are shrugging off the GM downgrade."
Another trader said Moody's downgrade of GM came as no surprise because Standard & Poor's had already downgraded the company in May (see related story, page 4).
Moody's lowered the ratings of GM's senior unsecured debt to Ba2 from Baa3, its short-term rating to Not Prime from Prime-3, and assigned a Ba2 corporate family rating and an SGL-1 speculative grade liquidity rating. It also downgraded General Motors Acceptance Corp. senior secured debt to Ba1 from Baa2, and its short-term rating to Not Prime from Prime-2. The rating for both companies is negative.