Momentive Performance posts earnings, bonds climb higher; Fannie, Freddie preferreds dominate

By Stephanie N. Rotondo

Phoenix, April 1 - Trading was "very, very thin" in the distressed debt realm, a trader said Monday.

With holidays and vacations continuing from last week, conditions were "not in our favor for getting much done," he said.

Overall, he said the market was on the mixed side.

In news-driven names, Momentive Performance Materials Inc. reported earnings on Monday. The report was taken positively, as the company's bonds pushed higher.

Fannie Mae and Freddie Mac preferreds continued to dominate the market, especially as Fannie readies to release its delayed 10-Q filing with the Securities and Exchange Commission this week.

Elsewhere, Caesars Entertainment Corp.'s 10% notes due 2018 were one of the day's most actively traded securities, without any news driving the movement, according to a trader.

He called the issue down nearly half a point at 68 3/8.

Another trader said Eastman Kodak Co.'s second-lien "stubs" were "continuing to rally," as the paper was "drifting into the low-50s."

Momentive debt rises

Momentive Performance Materials released its quarterly earnings on Monday and the bonds reacted favorably to the numbers.

A trader called the debt up 1 point to 1½ points, seeing the 9% notes due 2021 trade around "77-ish" and the 10% notes due 2020 at 101.

For the fourth quarter of 2013, the Waterford, N.Y.-based specialty chemical company reported net sales of $566 million, down from $596 million the year before. Operating loss, however, improved to $3 million, versus $28 million in 2011.

Overall net loss was $131 million, wider than 2011's fourth-quarter loss of $95 million. The increased loss was due to the extinguishment and exchange of debt.

For the year, net sales fell to $2.36 billion from $2.64 billion. Net loss was $365 million compared to $141 million the prior year.

But despite the sales decline, the company pointed out that it had paid down a significant amount of debt, leaving it with no major maturities until 2016.

Momentive had $362 million in liquidity as of the end of 2012.

Fannie, Freddie climb higher

Fannie Mae and Freddie Mac preferreds continued to dominate the market, especially as Fannie readies to release its delayed 10-Q this week.

Freddie's 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) closed up 6 cents, or 1.81%, to $3.38. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) ended a dime higher, or 3.08%, to $3.35.

Fannie had previously delayed putting out its report for the fourth quarter of 2012, given that it expected to turn a profit - both in the quarter and for the foreseeable future. As such, the company had to determine if the profits would trigger an accounting change in regard to its deferred tax assets.

As both Freddie and Fannie return to profitability, lawmakers are struggling to decide what to do with the government-backed mortgage providers. When the agencies were taken into conservatorship in 2008, most agreed that the firms would eventually be wound down and replaced with something else. But new profits are throwing those plans all out of whack and it is unclear what path to housing reform the government will take.

© 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.