Walter Energy posts wider loss, bonds slip; Samson rises despite downgrade; Fannie, Freddie up

By Stephanie N. Rotondo

Phoenix, Feb. 17 – The long holiday weekend, combined with a storm over New York and a school holiday on the East Coast, meant there was limited liquidity in the distressed debt arena on Tuesday.

However, there were a few news items that helped to move some things around.

Walter Energy Inc., for example, reported earnings on Tuesday, showing a wider-than-expected loss for the fourth quarter. The numbers then weighed on the coal producer’s debt.

One trader said the name was “lower after numbers,” placing the 9½% notes due 2019 at 62½.

That compared to levels around 66 previously, he said.

Another market source saw the 8½% notes due 2021 falling to 13 bid, 13¾ offered from 13½ bid, 14 offered.

However, a trader at another desk said that issue was a quarter-point higher at 13.

For the fourth quarter, Walter reported a net loss of $1.83 per share, versus $2.79 per share the year before.

Excluding certain one-time items, the loss was $1.97 per share, still wider than the $1.65 per share forecast by analysts polled by Bloomberg.

Revenues also missed the mark, coming in at $285.6 million.

Analysts were expecting revenue of $324.9 million.

The poor quarter was once again attributed to weak metallurgical coal prices, as well as declining demand – specifically from China and Europe.

The Birmingham, Ala.-based company also provided some guidance for 2015. For the year, Walter anticipates production will be 8.5 million to 9 million tons.

The company mined 9.3 million tons in all of 2014.

Samson downgraded

Elsewhere in the commodity space, Samson Investments Co.’s 9¾% notes due 2020 inched up a touch despite a parent company downgrade.

A trader called the bonds a quarter-point better at 36¼.

On Tuesday, Standard & Poor’s cut the company’s Samson Resources Corp. business to CCC+ from B-.

The Samson Investments notes were dropped to CCC- from CCC.

The agency said the downgrade was due to unsustainably high leverage and a weak liquidity position.

Fannie, Freddie power up

Fannie Mae and Freddie Mac preferreds were taking focus in Tuesday trading, a trader reported, following a round of news items through the long weekend.

On Friday, activist investor Bill Ackman made some bullish comments about the government-sponsored entities. On Saturday, the New York Times followed up with a piece about a shareholder lawsuit against the government in regards to a takeover of the agencies’ profits. According to the article, the Justice Department has asserted presidential privilege on at least 45 documents – raising questions about what said documents contain.

The article further alleged that the government’s use of privilege was nothing more than an attempt to hide something.

“Shocking,” a trader said, noting that the news had pushed up the two mortgage giants’ $50-par preferreds up about 60 cents to 70 cents and the $25-par paper up 35 cents.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) improved 41 cents, or 9.43%, to $4.76. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) gained 50 cents, or 12.2%, to $4.60.

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