Sprint, AK Steel bonds improve on results; JBS crashes after execs accused; SandRidge soft

By Stephanie N. Rotondo

Seattle, Jan. 26 – Distressed bonds were firming up again on Tuesday, helped in part by a round of earnings that were not as bad as some had expected.

Sprint Corp., for instance, reported a better-than-expected loss for the fiscal third quarter. The results were boosted by the company’s cost-cutting efforts, as well as a gain in subscribers.

“Sprint was by far the most active name,” a trader said.

Meanwhile, AK Steel Holdings Corp.’s fourth-quarter figures were far from stellar – the company swung to a loss from the previous year – but revenue and adjusted earnings came in above expectations.

In both cases, bonds rallied on the heels of the results.

Away from earnings, JBS SA saw its bonds take a dive after it was reported that prosecutors in Brazil – where the meat processor is based – had accused high-ranking executives of financial crimes.

SandRidge Energy Inc. paper also continued to drift down as expectations of a looming bankruptcy filing grew.

Sprint still active, better

Sprint, the Overland Park, Kan.-based wireless telecommunications provider, reported its fiscal third-quarter results on Tuesday.

The results – a better-than-expected loss and a gain in subscribers – helped the company’s debt continue to rebound from last week’s lows.

“Sprint bonds were flying,” a trader said, though he noted that paper was “higher at the open” than at the close.

He saw the 7% notes due 2020 trading up nearly 4 points, in “heavy volume,” to 65½. The 7 5/8% notes due 2025 were 1½ points better at 65½, he said.

The 8¾% notes due 2032 meantime gained a deuce, ending at 67, as the 6% notes due 2022 rose over 2 points to 65.

As for the 6 7/8% notes due 2028, the trader saw the issue putting on almost 2 points to close at 63¼. The 6.9% notes due 2019 were over 4 points higher at 75¾ and the 8 3/8% notes due 2017 added 3½ points to end at 95¼.

At another desk, the 6% notes due 2019 were seen up nearly 2 points at 98½ bid.

A third trader pegged the 7% notes due 2020 at 71, up 3 points on the day, but down from the day’s high of 73.

“Those bonds were certainly up a few points,” the trader said. “About 3 to 5 [points], depending on the issue you’re looking at.”

For the quarter, Sprint reported a net loss of $836 million, or 21 cents per share. That compared to a loss of $2.38 billion, or 60 cents per share, the year before.

Analysts had forecast a loss of 25 cents per share.

Revenue declined 9.7% to $8.11 billion, missing estimates of $8.23 billion.

Over 500,000 net postpaid subscribers were added during the quarter, up from a gain of 30,000 the year before. However, analysts polled by FactSet were hoping for an add of 510,000 customers.

Looking toward its full fiscal year, Sprint reversed its forecast, upping its adjusted EBITDA guidance to $7.7 billion to $8 billion from $6.8 billion to $7.1 billion. Operating income is expected to be in a range of $100 million to $300 million, versus previous estimates of a $50 million to $250 million loss.

AK Steel firm post-numbers

AK Steel’s fourth-quarter earnings fell into the red as the steel producer dealt with pension costs and declining sales and shipments.

Still, the results were better than expected.

As such, the company’s debt firmed up a fair bit.

One trader said the 7 5/8% notes due 2020 rose 4½ points to 40, while the 7 5/8% notes due 2021 improved 7 points to 38½.

“Those bonds kind of popped initially,” a second trader said, though the debt eventually “gave back a little.”

He said the 7 5/8% notes hit a high of 40, but went out just under that level.

AK Steel posted a net loss of $147.1 million, or 83 cents a share. By comparison, the company reported a profit of $13.5 million, or 7 cents per share, the year before.

On an adjusted basis, EPS came to a profit of 30 cents per share. Analysts polled by Thomson Reuters had forecast 1 cent per share.

Sales meantime declined 23% to $1.54 billion. That figure was still better than analysts’ projections of $1.5 billion.

Shipments fell to 1.66 million tons, down from 2.01 million tons shipped in the third quarter.

Evan Mann, an analyst with Gimme Credit LLC, noted that free cash flow was positive for the quarter at $101 million, which compared to a $504 million shortfall the previous year.

However, Mann noted in his afternoon comment published Tuesday that the cash flow was “short of our $195 million forecast.”

JBS execs in trouble

A trader said JBS’ 7¼% notes due 2024 were “actively traded” on Tuesday as it was reported that Brazilian prosecutors had accused several of the company’s executives of financial wrongdoing.

The news also sent the bonds downward, the trader said, seeing the issue lose “almost 10 points” to close at 78.

Another trader said the 7¾% notes due 2020 hit a low in an 89 to 90 zip code, which was down from the mid-90s.

Nine people from JBS and Banco Rural SA – which was liquidated in 2013 by Brazil’s central bank – were accused of wrongdoing involved with loans totaling about $20 million that were made in 2011. One such person was Joesley Batista, chairman of JBS.

Details of the accusations were not given due to court regulations.

SandRidge nears Chapter 11

SandRidge Energy’s debt continued to plummet Tuesday as expectations of a bankruptcy filing grew.

A trader saw the 8¾% notes due 2020 falling about half a point to just north of 2.

“The bonds are trading at weird levels,” another trader said. He noted that the debt was still trading with accrued interest, which could be playing a role.

“Some [are trading] at ½, some at 1, some at 2,” he said. “It’s all based on what amount of accrued is in these.

“When they are trading at these levels, why wouldn’t you” expect a foray into Chapter 11 protections, he said.

The Oklahoma City-based oil and gas producer said Monday that it drew down $489 million from a credit line in order to shore up liquidity during a period of depressed commodity prices.

The draw gives the company $855 million in cash on hand, though it means it owes a total of $500 million on the facility.

All told, the company has about $4 billion of debt.

Furthermore, it has been reported – though not confirmed – that SandRidge has been in talks with restructuring advisers and law firms about its restructuring options. One firm rumored to be helping out is Houlihan Lokey.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.