General Motors Corp bonds were mostly stronger on Friday after the automaker's board approved talks to discuss a possible partnership with Nissan Motor Co Ltd and Renault SA. In the broader US corporate market, spreads were firm and mostly unchanged.
This month Kirk Kerkorian, a key GM investor, suggested the company explore a relationship with Nissan and Renault. "Although we believe management will express scepticism over the benefits a potential alliance would bring to GM, we believe the company could gain from having Nissan's and Renault's CEO, Carlos Ghosn, advise GM during its restructuring process," Eric Selle, auto analyst at J.P. Morgan in New York, wrote in a research note released on Friday. Fitch Ratings on Friday said a partnership would be challenging for Renault, while GM's credit rating would be unaffected by a possible alliance.
GM's 8.375 percent bond due 2033 rose to 81.25 cents on the dollar, up from 80.125 cents on the dollar, according to MarketAxess. Also in the high-yield market, imaging center operator Radiologix Inc bond prices rose steeply after Primedex Health Systems Inc said it would acquire it. The deal would create the nation's largest owner and operator of fixed-site diagnostic imaging centers in the United States, Primedex said. Radiologix's ratings had been lowered deeper into junk territory this year by both Moody's Investors Service and Standard & Poor's.
"Radiologix bondholders don't have to worry about the company's credit rating going forward," Cheryl Richer, an analyst at Standard & Poor's, said on Friday. "Radiologix won't exist anymore and its bonds will be repaid, so the only risk of its bonds not being paid is the risk of the merger not going through." Radiologix's 10.5 percent note due 2008 rose to 101.94 cents on the dollar, up from 90 cents on the dollar, according to MarketAxess. In other markets, US Treasury debt prices rose after a government report pointed to a softer labour market. The benchmark 10-year note rose 11/32 in price to yield 5.14 percent.