Alpha Natural debt little changed as company plans job cuts; Affinion jumps; broad market firm

By Stephanie N. Rotondo

Phoenix, Sept. 19 - Distressed debt was on the firm side Wednesday, though a heavy new issue calendar in the high-yield realm kept most investors preoccupied.

"Not much stuff is down, it looks like most things are better," one trader remarked.

Another trader noted the "fair amount of new issuance" that occurred during the session.

"That's still the focus," he said.

Alpha Natural Resources Inc.'s debt was little moved by news out late Tuesday. The struggling coal producer announced more mill closures and job cuts, an effort it hopes will help it save money in the long term.

Meanwhile, a trader said Affinion Group Holdings Inc.'s bonds popped on no news. The company - owned by Apollo Global Management LLC - is laboring under a large debt burden that it needs to deal with quick before breaching loan covenants.

Alpha Natural plans cuts

A trader said Alpha Natural Resources' 6¼% notes due 2021 were "a smidge lower" on news the company was shuttering mills and laying off workers.

He saw the paper trading between 91 and 911/2.

"There wasn't much [going on] in coal names," he noted.

Another trader also saw very little movement in the company's debt, placing the 6¼% notes around 90¾ and the 6% notes due 2019 around 91.

The second trader also saw Patriot Coal Corp.'s 8¼% notes due 2018 being quoted unchanged to lower, though he said there were not trades.

He pegged the issue at 43 bid, versus 43 bid, 47 offered on Tuesday.

Late Tuesday, Bristol, Va.-based Alpha Natural said it was axing 1,200 jobs due to weak demand for its products. In the first phase, 400 workers from eight mines in Virginia, West Virginia and Pennsylvania will be affected.

The cuts are expected to save $150 million.

On the news, Standard & Poor's said it was placing its ratings on the company under review.

The outlook is negative.

Last week, St. Louis-based Patriot Coal announced it was curtailing production at some of its mines, also due to weak demand. On Sept. 5, Peabody Energy Corp. said it was cutting 230 jobs at a mine in Indiana.

Affinion debt pops

There was no fresh news out, but a trader saw Affinion Group's 11½% notes due 2015 rising almost 4 points on the day nonetheless.

He placed the bonds around 80.

Affinion manages perks used by banks and travel agents to retain clients. In its last earnings call in late July, the company warned that earnings would likely fall throughout the year, putting it at risk of breaching debt versus cash flow covenants on its bank debt. If they should default, that would then trigger accelerated payments on other outstanding debt.

However, the loans do include an equity cure provision, which would allow parent company Apollo to infuse cash into the company.

Distressed bonds strong

Elsewhere in the distressed market, a trader saw Clear Channel Communications Inc.'s 10¾% notes due 2016 up a point at 731/2.

However, another trader said the issue was unchanged around 73.

Overseas Shipholding Group's 8 1/8% notes due 2018 gained a deuce on the day, according to a trader, which he said was "weird because we heard shipping rates were going lower."

He placed the notes around 68.

Travelport LLC's 11 7/8% notes due 2016 were also higher, gaining a point to end around 42.

And, Caesars Entertainment Corp.'s 10% notes due 2018 moved up a point to 701/2.

Even Eastman Kodak Co.'s 9¾% second-lien notes due 2018 were firming, with a trader quoting the debt at 65½ bid, 66 offered.

But ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were not better, falling about a point to 23 bid, 23½ offered.

A trader said the issue was "not very active."

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