TXU expected to make interest payment, bonds up; NII posts wider loss, subscriber losses mount

By Stephanie N. Rotondo

Phoenix, Oct. 31 - Energy Future Holdings Corp. was the nom du jour in the distressed debt market on Thursday on speculation the company would make a $270 million interest payment on Friday.

The company had previously been engaged in talks with creditors to come to terms on a restructuring agreement, but thus far, no deal has been inked.

The company's bonds closed the day with a firmer tone.

NII Holdings Inc. was another topical name, as the provider of Nextel phone service in Latin America reported weak earnings and said it had suffered from subscriber losses.

Unlike Energy Future, or TXU as it is more commonly known, NII Holdings' paper dropped 5 to 10 points on the day.

Meanwhile, Alpha Natural Resources Inc. reported better earnings than expected, though it was a wider loss than the previous year. Still, the coal producer's debt moved up on the day.

Among other recently topical names, OGX Petroleo e Gas Participacoes SA's 8½% notes due 2018 continued to gain ground just one day after the company filed for the equivalent of bankruptcy in Brazil.

A trader placed the bonds at 91/2, up nearly a point.

Also, J.C. Penney Co. Inc. paper remained firm, with a trader seeing the 5.65% notes due 2020 up over a point at 75.

TXU to avoid Chapter 11

News outlets began reporting early Thursday that Energy Future Holdings, or TXU, planned to make a $270 million interest payment on Friday after talks with creditors faltered.

According to one trader, TXU "is priced for perfection currently." He noted that "discussions between the creditors and the company seeking to restructure almost $44 billion in debt failed, and the company will make an interest payment due tomorrow. So that's why all of a sudden people are scrambling for the bonds."

Another trader said the debt was "dominating the winners," rising anywhere from 1 to over 4½ points.

He saw the 10¼% notes due 2015 more than triple, gaining 4 5/8 points to close at 7. The 15% notes due 2021 increased 2 5/8 points to 291/4, while the 10% notes due 2020 put on over a point to close at 1051/4.

"There was pretty active volume in most of those [issues], even the low-dollar jobs," he said.

Another trader said TXU was "the biggest name of the day," seeing the 10% notes close up at 1051/2, up from 104.

Even if the company makes its interest payment on Friday, that does not preclude a bankruptcy filing in the future, especially given the massive debt load it faces. However, by making the payment, TXU has bought itself more time to talk with creditors.

NII customers defect

A trader said that NII Holdings "got beaten like a baby seal today" after reporting earnings.

He saw its bonds down "anywhere from 5 to 10 points on pretty heavy volume."

"They reported, they missed estimates - they said they won't achieve next year's view and they're going to miss their forecast by 30%."

Another trader estimated the debt fell 5 to 7 points after the numbers.

He called the 8 7/8% notes due 2019 off 5½ points at 631/2, while the 7 5/8% notes due 2021 declined by 6¾ points to 583/4.

He noted that the 10% notes due 2016 were "trading insanely," falling 6¾ points to 781/4.

For the quarter, the Reston, Va.-based company posted a wider net loss of $299.9 million, or $1.74 per share. That compared to a loss of $82.4 million, or 48 cents per share, the year before.

Operating revenue fell 22% to $1.1 billion.

Analysts polled by Thomson Reuters were expecting a loss of $1.17 per share on revenue of $1.23 billion.

Also during the quarter, NII had net subscriber losses of 178,400. The company warned that more losses were expected in the fourth quarter.

NII then said that its full-year adjusted operating income was likely to come in about $200 million below previous forecasts of $600 million to $650 million.

The company attributed its wider loss and subscriber losses to its attempts to upgrade its network to 4G. In doing so, NII was unable to migrate some of its Sprint Corp.'s iDEN network customers, which caused some of those customers to defect.

Alpha Natural loss increases

Alpha Natural Resources also reported earnings on Thursday, posting a wider loss than the previous year.

Still, the results were better than what analysts were expecting.

Given that, the company's bonds were trading higher on the day. A trader saw the 6% notes due 2019 up a deuce at 86¾ and the 6¼% notes due 2021 up 1¾ points at 851/4.

Another market source pegged the 6 ¼% notes at 85¼ bid, up a point.

For the quarter, Alpha Natural had a net loss of $458 million, or $2.07 per share. For the same period of 2012, net loss was $46 million, or 21 cents per share.

Revenue declined 25% to $1.2 billion.

Adjusted loss was 61 cents per share, which was better than the 77 cents per share analysts polled by Thomson Reuters were expecting.

Additionally, the company cut its capital expenditure program to $260 million to $290 million. The company had previously forecast expenditures of $275 million to $325 million.

The Bristol, Va.-based company also said it had set a capex budget of $250 million to $350 million for 2014 and said it would seek to reduce costs more.

One such way was to eliminate 230 jobs throughout the company.

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.