Sprint, Springleaf, other 'risky' credits gain steam; McClatchy heads up; PMI, Radian plummet

By Stephanie N. Rotondo

Portland, Ore., Oct. 24 - The bond market was "up and up" on Monday, according to a trader.

The general strength of the market helped many distressed credits gain ground.

Even names like Sprint Nextel Corp. and Springleaf Finance Corp. were higher, despite being placed on Gimme Credit LLC's list of riskiest junk credits.

McClatchy Co. debt meantime headed for higher ground after reporting third-quarter results on Friday.

But while most names were on the rise, PMI Group Inc. and Radian Group Inc. - both of which are distressed mortgage insurers - were on the decline. The slides came after PMI said late Friday that regulators had seized its main unit.

Sprint, Springleaf gain

Despite being among a list of 10 companies that were considered the riskiest of the junk world, Sprint Nextel and Springleaf paper climbed higher.

A trader saw Sprint's 6 7/8% notes due 2028 moving up to 781/2, while another deemed the 6% notes due 2016 a point better at 90½ bid.

He also called Springleaf's bonds "very active," seeing the 5 3/8% notes due 2012 up 1½ points to 75 and the 6.90% notes due 2017 up a deuce, also to around 75.

At another shop, a trader said Springleaf's 6.90% notes were a point firmer at 74 bid, 75 offered.

Also making the list put out by Gimme Credit was Supervalu Inc. and Hovnanian Enterprises Inc.

A trader said Supervalu was mostly higher, though the 8% notes due 2031 were "kind of unchanged" around 811/2.

Another market source saw Hovnanian's 10 5/8% notes due 2016 up a point at 84 bid.

Other names on the list included Dynegy Inc., Realogy Corp., Beazer Homes Inc. and Claire's Stores Inc.

"Although the high-yield market has rebounded off recent lows, there remains considerable uncertainty about the domestic economy, the European credit crisis and slowing growth in emerging markets," wrote Kim Noland, head of high-yield research, in the report.

"If what appears to be a modest economic recovery stalls, these companies are particularly vulnerable due to their weak fundamentals."

McClatchy up post-earnings

Newspaper publisher McClatchy reported earnings on Friday and despite lower revenues and advertising sales, the bonds were moving up come Monday.

A trader said the 11 ½% notes due 2017 were "fairly active" at 95 bid, 95½ offered.

Another trader called the notes up nearly 2 points at 953/4, with about $20 million trading.

For the third quarter, the Sacramento-based company reported net income of $9.4 million, or $0.11 per share. That compared with a profit of $11.9 million, or $0.14 per share, the year before.

Revenues fell 8.4% year over year to $300.2 million. Ad sales dropped 10% and circulation revenues fell 3.5%.

"As we look to the fourth quarter, we recognize that we have some pretty tough comparisons in October and November," said Gary Pruitt, chairman and chief executive officer, in the earnings release.

"But we expect our new digital initiatives to continue to pay off in the quarter and we will begin to cycle over the decline in national advertising that hit in December 2010 and persisted throughout 2011. Advertising revenue trends so far in October are in the same high single-digit range as September. We remain focused on controlling costs and expect to again reduce cash expenses in the fourth quarter in the high-single digits."

The company reduced its debt by $115 million in the first nine months of the year. Cash and equivalents was $17.2 million and, combined with amounts available under its revolving credit facility, the company has liquidity of about $95.1 million.

"We believe we have the runway to weather this stormy economic climate, even if it doesn't improve in the near term, and we will continue to focus on debt reduction to maintain our financial position," said Pat Talamantes, McClatchy's chief financial officer, in the release.

PMI, Radian plunge

PMI Group and Radian Group bonds were the "big losers of the day," according to a trader.

The losses came as PMI's main unit was seized by regulators and Radian's top executive said in a news interview that the housing arena remained in a "very fragile situation."

The trader saw PMI's 6 5/8% notes due 2036 falling to 231/2, down from last round-lot levels of 431/2. Radian's 5 5/8% notes due 2013 meantime plunged more than 12 points to 70, he said.

He noted that trading in both credits was thin.

Another trader said PMI paper was quoted down 4 to 5 points, the 6 5/8% notes and 6% notes due 2016 trading around "25-ish, mostly attached to the CDS unwind."

PMI's PMI Mortgage Insurance Co. subsidiary as seized by Arizona regulators before the weekend, pending a hearing regarding whether the unit should be placed into a receivership.

The unit was placed under regulator supervision in August. On Friday, PMI Reinsurance Co., PMI Mortgage Guaranty Co. and Residential Insurance Co. were also been placed under supervision.

If the PMI Mortgage unit is placed into a receivership, the 4.5% convertible notes due 2020 will be accelerated, which could lead to the acceleration of other debt. PMI has said it does not have the resources to pay off the debt and is therefore exploring its options.

The Walnut Creek, Calif.-based company has hired Evercore Partners Inc. and law firms Sullivan & Cromwell LLP and Young Conaway Stargatt & Taylor LLP to evaluate its restructuring options.

Broad market rises

Among other distressed issues, a trader said Caesars Entertainment Corp.'s 10% notes due 2018 rose 3 points to end around 75.

"There was a lot of stuff that went along for a ride like that," he said.

Another trader pegged Eastman Kodak Co.'s 7¼% notes due 2013 at 47 bid, 48 offered and the 9¾% notes due 2018 around 73.

The trader also aw Lehman Brothers Holdings Inc.'s paper trading actively, seeing the benchmark issues trading around "25-ish."

And, NewPage Corp.'s 11 3/8% notes due 2014 were "up a touch" around 74.

© 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.