Intelsat beats expectations, firms; Bombardier wanes post-earnings; Murray, Foresight weaken

By Stephanie N. Rotondo

Seattle, Oct. 29 – Earnings news continued to be the main driver of distressed debt on Thursday.

Intelsat SA was one of the day’s gainers after the company came out with quarterly results that beat expectations. Given the decent performance, the company also affirmed its 2015 guidance.

However, not all earnings news was good.

Bombardier Inc., for instance, gave back some of the previous day’s gains after the Quebec-based aerospace company reported its numbers. Even confirmation that the Quebec government was investing $1 billion into the company’s CSeries program failed to give the bonds a boost.

Murray Energy Corp. and Foresight Energy LP were meantime among the day’s biggest losers following the release of Foresight’s latest financials. Foresight – which Murray took a controlling interest in back in April – reported a narrower profit for the quarter.

Intelsat improves

A trader said Intelsat bonds “initially were better, then they kind of reversed,” though the debt did finish the day “up marginally.”

The trader pegged the 7¾% notes due 2021 in a 63 to 64 range, down from the intraday high in a 66 to 66½ context.

Another market source saw the 6 5/8% notes due 2022 at 80½ bid, up 1½ points.

For the quarter, the Luxembourg-based satellite services provider reported net income of $78 million, or 66 cents per share, on revenue of $580.8 million.

Revenue was down about 4.5% year over year.

On an adjusted basis, earnings per share came to 85 cents.

Adjusted EBITDA was $458.1 million, or 79% of revenue.

Wall Street had forecast adjusted EPS at 39 cents on revenue of $582.5 million.

Intelsat also affirmed its guidance for 2015. The company is expecting to post full-year revenue of $2.33 billion to $2.38 billion. Adjusted EBITDA is forecast between $1.81 billion to $1.86 billion.

Bombardier gives up gains

Bombardier bonds lost altitude Thursday after the company reported its own quarterly results.

A trader saw the 6 1/8% notes due 2023 ending around 78, which compared to levels around 80 on Wednesday. A second source called the 7¾% notes due 2020 down 1½ points at 87½ bid.

Bombardier posted a $4.9 billion loss of the quarter, due in large part to a $4.4 billion charge that was mostly due to its CSeries jet program. There was also a $1.2 billion writedown on the company’s Lear85 project, which has been cancelled.

However, the aerospace and transportation company did have a few positives to note. As of the end of the most recent quarter, it had $4 billion in liquidity. Additionally, the company confirmed that the Quebec government had agreed to invest $1 billion into the CSeries planes.

Alain Bellemare, chief executive officer, admitted during a conference call to discuss the results that the company was “overwhelmed” by its many programs and as such, has had to scale back on certain projects, such as the Lear85.

With the new investment from Quebec, the company could have room for liftoff of the CSeries, which had struggled to hit runways due to cost overruns and general delays. The company hopes to get the aircraft out the door in the first half of 2016.

Murray, Foresight pressured

Murray Energy and Foresight Energy saw their bonds take a dive Thursday after Foresight reported a weaker profit.

A trader said Murray’s bonds were down “a dozen points,” trading in a 36 to 37 context. Foresight was meantime off 6 to 7 points, with a trader placing the notes at 77.

That compared to around 83 previously, the trader said.

For the third quarter, Foresight reported net income of $8 million, down from $45.4 million the year before. The earnings were impacted by a $5 million charge related to Murray’s $1.4 billion acquisition of a controlling interest in Foresight in April.

Revenue declined 15.6% to $253.1 million. The weaker cash stream was attributed to the current state of the coal markets, as well as lower international shipments.

In addition to reporting earnings, Foresight said Oscar Martinez, its chief financial officer, would resign his post, effective Nov. 13.

His departure is due to the integrations with Murray’s staff. Murray’s James Murphy, chief accounting officer, will take over the CFO role on Nov. 6.

Magnum, Goodrich fall with oil

Domestic crude oil prices stemmed a recent rally on Thursday as investors worried about a potential interest rate increase come December.

A rate hike would result in a stronger dollar, making it more difficult for some countries to purchase U.S. oil.

West Texas Intermediate crude for November delivery fell 14 cents to $45.80. On Wednesday, the price had popped 6.3% after the U.S. Energy Information Administration’s latest weekly inventory report showed a smaller-than-expected increase in stockpiles.

Still, as crude declined, so did preferreds linked to that commodity.

Magnum Hunter Resources Corp.’s 8% series D cumulative preferreds (NYSE: MHRPD), for instance, weakened 22 cents, or 14.67%, to $1.28. The 10.25% series C cumulative perpetual preferreds (NYSE: MHRPC) declined 37 cents, or 13.81%, to $2.31.

Goodrich Petroleum Corp.’s 10% series C cumulative preferreds (NYSE: GDPPC) meantime fell 11 cents, or 4.78%, to $2.19.

Peabody converts hit new low

Meanwhile in the convertibles market, Peabody Energy Corp.’s convertibles hit their lowest level yet as the company’s shares fell further following weak earnings posted earlier this week by the St. Louis-based coal company.

“There is the possible question of how much time do they have left before they have to restructure at some point,” a Connecticut-based trader said regarding the distressed company.

Peabody’s 4.75% convertibles due 2066 traded last at 8.5, which represented a new low, a trader said. Earlier in the week, the bonds had gone from 12 to 9. Peabody shares fell $4.19, or 24%, to $13.10 on Thursday.

“The last couple of days it’s been going lower,” the trader said.

On Tuesday, Peabody reported a quarterly loss, but earnings excluding one-time items beat estimates and revenue beat as well, but the coal company lowered its 2015 volume guidance.

Revenue was $1.42 billion for the period, compared with $1.72 billion in the third-quarter a year earlier, due to a 7% decline in volume and lower realized pricing, according to the company’s earnings release.

Adjusted earnings were $129 million.

The coal sector globally fell in the quarter on concerns over slowing global growth and economic weakness in China, Peabody said. This resulted in a reduction in global coal demand that more than offset recent cuts in supply and put pressure on seaborne coal prices.

Seaborne metallurgical coal markets have been hurt by a 5% decline in domestic Chinese steel consumption through September. Meanwhile, the low prices of natural gas have depressed demand in the United States for utility coal. Peabody now projects utility coal demand will decline about 100 million tons in 2015. Coal’s share of U.S. electricity generation is expected to be 35%.

U.S. coal shipments are projected to decline 90 million tons this year, and additional production cutbacks are expected.

-Rebecca Melvin contributed to this report

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