Distressed arena ends with positive tone; Alpha natural, Clear Channel bonds gain on earnings

By Stephanie N. Rotondo

Phoenix, Nov. 2 - Distressed debt was mixed to better Friday, as the chaotic week spurred by Hurricane Sandy came to an end.

Alpha Natural Resources Inc. and CC Media Holdings Inc. - the parent of Clear Channel Communications Inc. - reported third quarter earnings on the last trading day of the week. Both saw their bonds gaining ground.

Meanwhile, Energy Future Holdings Corp.'s debt continued to be actively traded. However, the debt ended the day in mixed fashion.

Overall, a trader said volume was "still fairly light," though he noted that he was "starting to see more people in the office," as they attempted to regroup post-Hurricane Sandy.

Alpha Natural rises

Production cuts imposed at Alpha Natural Resources' mines helped the Bristol, Va.-based coal producer improve its bottom line in the third quarter.

That in turn gave the company's bonds a boost, according to traders.

One trader said the 9¾% notes due 2018 - a recent new issue - was the most active of the capital structure. He called the bonds up 1¾ points at 1033/4.

The 6¼% notes due 2021 were meantime 1¼ points better at 891/2.

Another trader said the debt was "better after the numbers," calling them up 1½ to 2 points on the day. He pegged the 9¾% notes at 103½ bid, 104 offered.

Another market source deemed the 6¼% notes up 1¼ points at 89½ bid.

Alpha Natural reported a net loss of $46 million, or 21 cents per share, for the third quarter, versus income of $63 million, or 28 cents per share, the year before.

Still, that was much better than the $2.23 billion loss seen in the second quarter of 2012.

Revenues came to $1.45 billion, down from $1.99 billion in 2011.

"Market conditions for both metallurgical and thermal coal have been challenging throughout much of 2012, and continued in the third quarter," said Kevin Crutchfield, Alpha's chairman and chief executive, in the earnings release. "In the face of these market headwinds, Alpha has taken swift and decisive actions to right-size our operational footprint and our cost structure."

One such action was reducing production by 16 million tons annually. When combined, production cuts and other restructuring actions are expected to generate $150 million in annual overhead savings.

Clear Channel pushes higher

Clear Channel Communications was on the rise Friday, after the San Antonio-based multimedia company reported increased revenues for its third quarter.

A trader placed the 10¾% and 11% LBO bonds due 2016 around 75 and called the 9% notes due 2021 a point firmer at 88½ bid, 89 offered.

Revenues increased to 41.59 billion from $1.58 billion. Across the CC Media Holdings Inc. span, the international outdoor advertising unit was the only one to see a decline in revenue.

The revenue gain was due in part to political advertising.

Net loss narrowed to $50.56 million from $74.05 million.

All quiet on the Edison front

Traders said that activity in Edison International Inc.'s debt was basically nil, despite the company's dismal earnings posted after the market closed on Thursday.

"There's no real volume," a trader said, calling the debt generally mixed.

"I didn't see a lot of trading in it, despite all the stuff that was going on out there," said another trader.

For the quarter, the Rosemead, Calif.-based utility provider posted overall earnings of $190 million, or 58 cents per share, versus $426 million, or $1.31 per share, the year before.

The parent company attributed the decline in earnings to "losses at Edison Mission Group and to a delay in the California Public Utilities Commission final decision on Southern California Edison's 2012 General Rate Case."

For its part, Edison Mission saw a core loss of 28 cents per share, which compared to earnings of a nickel per share for the third quarter of 2011. The swing to a loss was attributed in part to reduced generation and higher fuel prices.

The rumor mill has been chattering for months that Edison International might look to put the Edison Mission unit into bankruptcy, given its $3.7 billion in unsecured debt.

TXU still busy

Energy Future Holdings' bonds remained active on Friday, though the structure was mixed by the end of business.

A trader said the 10% notes due December 2020 were down slightly around 107, but the 10% notes due January 2020 were up, trading around 104.

He also saw the 6.55% notes due 2034 falling nearly a point to 361/2.

A second trader saw the 11¾% notes due 2022 going out around 95, though he noted that the paper had been lower earlier in the day.

He also said the 6.55% notes were on the weaker side, though they "rebounded a little bit from their lows."

He quoted the issue at 36 bid, 37 offered.

Energy Future, also known as TXU, saw its bonds decline massively on Wednesday following the release of the company's quarterly results.

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