Improved second-quarter results spark rally in AMR bonds; Cemex climbs; Patriot Coal stronger

By Stephanie N. Rotondo

Phoenix, July 18 - There were "buyers of everything today," a distressed debt trader said Wednesday.

"It really was just a land grab," he said, pointing to widespread belief that a third round of quantitative reasoning would occur, as well as low interest rates. "Everybody wants to put money to work."

With buyers coming out of the woodwork, that also gave the market a firm feel.

"Most things were better," another trader said.

AMR Corp.'s debt was following that trend, helped in part by a narrowed second-quarter loss. Cemex SAB de CV bonds were also rising.

Cemex is expected to report its earnings on Friday. On Tuesday, the Wall Street Journal published an article that speculated the company's results would be improved.

Meanwhile, Patriot Coal Corp.'s upward climb continued during the midweek session, though there remained no news out on the bankrupt coal producer.

AMR boosted by results

AMR, the bankrupt parent company of Fort Worth, Texas-based American Airlines, reported improved second-quarter results on Wednesday.

The earnings report helped the company's bonds rally, according to a trader.

He pegged the benchmark 6¼% convertible notes due 2014 around 67, up "2 or so" points.

At another desk, a trader called the 6¼% notes "up a couple" at 66½ bid, 68½ offered.

7½% notes due 2016, however, were "not much different" at 96 bid, 96¾ offered.

A third trader saw the 6¼% notes trading up to 67.

For the second quarter of 2012, AMR reported a narrowed loss of $241 million. That compared to a loss of $286 million the year before.

AMR said that the loss was largely due to costs associated with its restructuring and that without those costs, it would have posted a $95 million profit.

Additionally, the company said that it had record revenues of $6.46 billion. The boost was attributed to an increase in corporate travel accounts and fare-sharing agreements with British Airways, Iberia and Japan Airlines.

Fare prices also helped the bottom line, as ticket prices rose 7% and capacity was a record 85.1% between American and its American Eagle regional carrier.

Cemex firms ahead of earnings

Mexican cement producer Cemex also reported an improved second quarter. A preliminary assessment of the results was released on Tuesday in the Wall Street Journal, which sparked gains in the bonds come Wednesday.

Full results come out Friday.

A trader called the 6.722% notes due 2049 up a couple points at 65, while the 9¼% notes due 2020 inched up modestly to 863/4.

According to the Journal report, Monterrey-based Cemex is expected to report sales of over $4 billion, which would be in line with the previous year. EBITDA is meantime expected to increase to $669 million from $615 million, due to an improved U.S. market and cost-cutting initiatives.

Net loss is estimated to decline to $155 million from $294 million.

Among other Mexican companies, Axtel SAB de CV's 9% notes due 2019 dropped 2½ points to 621/2, according to a trader.

Patriot's rise continues

Despite a lack of news to drive the debt, Patriot Coal's bonds have continued to head into higher territory ever since filing for bankruptcy on July 9.

One trader called the 8¼% notes due 2018 "up another point" around 47. Another trader pegged the issue around 49.

A third source deemed the paper up nearly 4 points at 47 bid.

Patriot is a St. Louis-based coal producer.

Broad market gains traction

Elsewhere in distressed, a trader said Dynegy Holdings LLC's 8 3/8% notes due 2016 moved up to around 65.

In financial names, Ambac Financial Group Inc.'s bonds - which tend to trade in line with one another - firmed to close around "29-ish" on no news.

And, Lehman Brothers Holdings Inc.'s debt finished half a point higher at 24.

Another trader said MF Global Futures Ltd's bonds "are up today, though I don't know the reason for it," seeing the notes up around 45.

The trader also said that Radiation Therapy Services Inc.'s bonds "did well today, though I don't see the reasoning behind it."

He saw the 9 7/8% notes due 2017 move up to 65, "up a couple of points, as they recoup some of the losses" the bonds recently suffered after the Centers for Medicare and Medicaid Services - the government body that sets Medicare and Medicaid reimbursement rates - published preliminary 2013 reimbursement rates that would cut government payments to companies such as Radiation Therapy by as much as 40% from current levels for some services.

There were, however, spots of weakness.

A trader said Clear Channel Communications Inc.'s 10¾% notes due 2016 were "down over a point" at 62, while Nokia Corp.'s 5 3/8% notes due 2019 were "drifting down another half a point," closing in a 731/2-74 context.

Paul Deckelman contributed to this article

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