Weak earnings pressure Alpha Natural, Key Energy, Affinion; iHeart’s numbers improve, bonds up

By Stephanie N. Rotondo

Phoenix, April 30 – A fresh round of earnings were keeping distressed debt investors busy on Thursday.

For the most part, the results were not pleasing and that weighed on the secondary market in general.

In commodities, coal producer Alpha Natural Resources Inc. reported numbers that came in below expectations.

Key Energy Services Inc. also came out with quarterly figures on Thursday, showing lower revenue and a wider loss. Given the state of the oil market, the company has also decided to exit operations outside of North America and will focus on production enhancement projects.

Away from the commodity realm, Affinion Group Holdings Inc. released first-quarter results that showed a decline in revenue and weaker adjusted EBITDA.

Though most of the earnings news weighed on the market, a narrower loss helped iHeartMedia Inc. paper improve.

Alpha debt dips

Alpha Natural Resources’ bonds were coming in on the heels of the company’s earnings announcement.

At one desk, a trader said the 6% notes due 2019 were “pretty active,” but down nearly 2 points at 21.

Another trader said the debt was “a little bit lower,” pegging the 6% notes at 21 and the 6¼% notes due 2021 at 19 bid, 19½ offered.

While the 7½% second-lien notes due 2020 were not that active, the trader said that issue declined a deuce to 37.

A third source deemed the 6¼% notes off a point at 20 bid.

During the first quarter, Alpha Natural saw revenue fall 24% to $842 million, with sales volumes down 11%.

Despite the revenue drop, the company was able to report a net profit of $68.2 million, or 30 cents per share. The bottom line was helped by a $364 million gain from early debt repayment.

But on an adjusted basis, the company saw a loss per share of 79 cents. Analysts polled by Thomson Reuters had predicted an adjusted loss of 73 cents per share.

As of the end of the quarter, Alpha Natural had a decent liquidity cushion of $1.9 billion.

Looking further into 2015, Alpha Natural slashed its capital expenditure budget to $200 million to $250 million, versus $225 million to $275 million the year before.

And though the company “reaffirmed its previous 2015 shipments guidance... without a meaningful recover [sic], liquidity will become a significant issue in 2016,” wrote Gimme Credit LLC analyst Evan Mann in an afternoon comment published Thursday.

Key Energy weakens

With the oil markets in tumult, Key Energy Services announced Thursday that it planned to exit its operations outside of North America, choosing to focus on product enhancement projects domestically.

The announcement came alongside the company’s earnings release, which was lackluster.

On the news, a trader said there were “loads of trades” in the 6¾% notes due 2021, which he saw ending down half a point at 66¾.

Another trader said there was “a bunch of trading” in the debt, calling the issue “down about half a point or so.”

He also saw the paper ending with a 66 handle.

For the quarter ended March 31, the Houston-based oilfield services provider saw its revenue decline to $267.8 million from $356.1 million the year before. Net loss widened to $59.7 million, or 39 cents per share, from $11.9 million, or 8 cents per share, for the same quarter of 2014.

Adjusted EBITDA came to $600,000, compared to $46.3 million the previous year.

The exit of operations outside North America will consist of either selling assets or relocating them, the company said.

Key Energy is also working on replacing a credit facility. The new financing is expected to close in the second quarter.

Affinion comes in

Affinion Group Holdings’ 7 7/8% notes due 2018 saw “lots of trades” in Thursday’s session, according to a trader.

The activity came as the company reported its first-quarter results.

The trader said the notes were down 2 points at 63½.

Another trader said the bonds were “a few points lower.” He said the debt hit lows around 61½, though they went out around 63.

In the first quarter, the Stamford, Conn.-based marketing company saw revenue fall 5.9% to $302.2 million. Adjusted EBITDA meantime declined 17.2% to $58.4 million.

The weaker revenue came despite a 9.4% gain in the company’s global loyalty segment. International products declined 7.9%, while membership products dropped 11.4%.

iHeart’s loss improves

Bucking the day’s trend, iHeartMedia – formerly known as Clear Channel Communications – reported a narrower quarterly loss, resulting in gains for the company’s debt.

A trader deemed the 14% notes due 2021 a point better at 80 and placed the 10% notes due 2018 in an 87¼ to 88 context.

Revenue improved just under 1% during the quarter, coming to $1.34 billion.

That figure came in just below analysts’ expectations of $1.26 billion.

Net loss was $385 million, versus $424 million the year before.

The Clear Channel Outdoor Holdings Inc. unit also reported a better quarter. Net loss was $33.5 million, compared to $97 million for the first quarter of 2014.

However, due to a strong dollar, revenue slipped 3% to $615 million.

Analysts polled by Thomson Reuters had forecast revenue of $637 million.

Stress and Fannie, Freddie

Fannie Mae and Freddie Mac preferreds ended higher Thursday, though down from earlier highs.

The paper began to gain steam in early trading after it was reported that a memo from the Treasury had surfaced that could be construed to show that the federal government acted in bad faith when it placed the agencies under conservatorship in 2008.

However, the authenticity of the document has been called into question, as well as its bearing on pending shareholder lawsuits.

After that news came out, it was reported that the GSEs are not as stable as some might like to believe. In the event of a severe economic downturn, Fannie and Freddie would require up to $157.3 billion in bailout funds, according to stress test results released by the Federal Housing Finance Agency.

The results could, however, bolster pending lawsuits that allege the government’s takeover of a majority of profits was illegal. Given the conscription, the agencies have been unable to build up any capital cushion.

Still, investors were pushing the paper higher, as Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) ended up 17 cents, or 3.52%, to $5 a share. In earlier trading, the shares had put on 42 cents, or 8.77%, to $5.25.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were meantime up 16 cents, or 3.31%, at $5. The paper was up 36 cents, or 7.44%, at $5.20 at mid-morning.

© 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.