Sprint mixed, Charter 'all over the place'; Smurfit-Stone bonds hold steady; Freeport active, higher

By Stephanie N. Rotondo

Portland, Ore., Jan. 27 - Distressed bond traders called the overall market strong on Tuesday, though some expressed frustration over the day's activities.

"Complete apathy," a trader said when asked what was the problem.

Another noted that while there "was stuff trading, it was pretty boring price-wise."

"There's really no theme to the market, at least that I can see," he added.

However, the trader did remark that investors seemed interested in the telecommunications and health care sectors. "Outside of those sectors, guys are afraid."

But the interest in telecom might explain the action in Sprint Nextel Corp.'s debt. The wireless company's bonds ended the day largely mixed, following news Monday that Sprint was planning a massive job cut. Among other names in the sector, Charter Communications Inc.'s paper was deemed "all over the place."

In the world of retail, Rite-Aid Corp.'s bonds took a beating, with some issues falling as much as 8 points on the day. According to one analyst, the losses might be due to investors' optimism waning.

Meanwhile, Smurfit-Stone Containers Corp.'s notes were steady, after experiencing a run-up in the previous session - despite news of a bankruptcy filing. One source speculated that short covering was to blame for the recent gains.

Freeport-McMoran Copper & Gold Inc.'s debt closed slightly better, traders reported. The mining company's bonds had slipped some in the previous session, even as the company posted better-than-expected quarterly earnings.

Sprint Nextel bonds mixed

Sprint Nextel's bonds traded some during Tuesday's session, just one day after the company announced massive job cuts.

A trader saw about $20 million of the 7 5/8% notes due 2011 trade around 82. Another source placed the 8 3/8% notes due 2032 "around 60." The second trader noted that the debt seemed "unchanged to maybe a tad weaker."

But another market player called the 6% notes due 2016 slightly better at 65.5 bid, 66.5 offered.

On Monday, Sprint announced plans to slash its workforce by about 8,000 jobs in the first quarter. Furthermore, the Overland Park, Kan.-based wireless provider said it would suspend its 401k match through 2009 and would continue its salary freeze.

Among other struggling telecommunications companies, Charter Communications' debt was "all over the place," a trader said. He quoted the 8¾% notes due 2013 at 71.5 bid, 73.5 offered.

Charter is one of 15 companies that have defaulted since the beginning of the year. The St. Louis-based company missed its Jan. 15 coupon and subsequently entered into a 30-day grace period. But Charter noted that the affected debt was part of the ongoing negotiation process with bondholders.

Sprint Nextel will release fourth-quarter earnings on Feb. 19.

Rite Aid hurts

A trader saw Rite Aid's bonds "getting hammered," with the company's most active issue, its 9½% notes due 2017, seen down 5 points at 23.5 bid on volume of $6 million. He also saw its 6 3/8% notes due 2016 drop to 59.5 bid from 63.5 on Monday, while easily the biggest loser was its 8 5/8% notes due 2015, which slid to a round-lot closing level of 20 from the most recent previous round-lot price of 34.5 recorded last week.

At another desk, the bonds were seen having swooned about 8 points on the day, also to the 20 level.

Analyst Robert Veno of KDP Investment Advisors Inc. in Montpelier, N.H., cited Moody's Investors' Service' downgrade of Rite Aid's ratings earlier this week, which followed the company's recent renewal of an asset-backed financing agreement, although its borrowing availability under the facility was cut, which he called "good news-bad news."

Those developments, he said, "might have prompted some questions about their liquidity." Veno, a vice president of the company in charge of analysis of retail and health care companies, said, "Those two stories were sufficient to make enough people look at the company a little bit more closely.

He also noted that Rite Aid's bonds had recently risen and suggested that the increase had been "too optimistic," and investors were now having some second thoughts.

Smurfit paper holds steady

Smurfit-Stone's bonds were unchanged following its bankruptcy filing, according to traders.

A trader said the bonds remained at "14 up and down" Tuesday, adding that a "decent amount traded."

But another trader saw the bonds "settling off" on the day and going out around 12.5 bid, 13 offered, after having been quoted earlier as high as 14 bid, 15 offered, around the levels to which the bonds had risen Monday following the company's bankruptcy filing. The bonds, all "trading on top of one another," were all trading flat, or without their accrued interest. He said that there had been "pretty decent activity" in the name.

The cardboard maker's debt had moved up on Monday, despite news that the company had filed for bankruptcy protection. On Tuesday, a trader speculated that the gains were largely due to short covering.

On the back of the news, Standard & Poor's, Moody's Investors Service and Fitch Ratings cut Smurfit's credit rating. In fact, S&P dropped the company to its lowest rating and gave unsecured bonds a 6 recovery rating, meaning noteholders could expect very little in the way of recovery.

Freeport active, higher

Freeport-McMoRan's paper inched higher during trading following the company's earnings release on Monday.

A trader placed the 8 3/8% notes due 2017 at 79.75, about a point better than Monday's levels. He saw about $50 million of the debt change hands. Yet another trader pegged the bonds at "around 80, give or take."

The economic downturn has resulted in job and production cuts at Phoenix, Ariz.-based Freeport. As the demand and price of copper has declined, the company has warned that earnings would not be up to par.

But in a surprising twist, Freeport managed to report better-than-expected earnings for the quarter. Excluding one-time charges, the company posted a profit of 6 cents per share. With those charges, that number fell to a loss of 86 cents per share. That was lower than market expectations of $1.01 per share.

Still, the company is looking at more ways to cut spending. According to a Bloomberg report, Freeport has gone so far as to use some of its trucking fleet - some of which has been out of operations - for spare parts, including tires.

Paul Deckelman contributed to this article.

© 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.