Verso Paper bonds decline as CFO departs; Toys debt rises on new CEO; Peabody pleases analysts

By Stephanie N. Rotondo

Phoenix, June 3 – Distressed debt investors took a little break from the recent all-commodities-all-the-time craze and instead turned their attention to a couple of companies that had fresh news out.

One such company was Verso Paper Corp., whose bonds declined after the papermaker said its chief financial officer was leaving his post. Toys “R” Us Inc.’s debt was meantime better as the toy retailer said it had hired a new chief executive officer.

There did continue to be some activity in commodity-related names, however. Peabody Energy Corp., for instance, was mixed on the day after analysts reported on their meetings with the company’s new CEO.

Peabody’s stock got a boost on said report, though it still ended weaker on the day.

Verso falls on CFO exit

Verso Paper’s 11¾% first-lien notes due 2019 were deemed “pretty active” on Wednesday as the company announced the departure of its CFO.

A trader said the debt moved to the low-70s from the mid-70s.

Another trader said almost $40 million of the bonds changed hands during the session, falling 3½ points to 71.

Robert Mundy left his position at the Memphis-based company for a similar one at Packaging Corp. of America. Mundy will stay on until June 30 and will provide “periodic transitional assistance” for the two following months.

Toys hires new CEO

Among other management changes, Toys “R” Us announced Wednesday that it had hired David Brandon as its new CEO, effective July 1.

Brandon was previously the head of Domino’s Pizza Inc. and Valassis Communications Inc. from 2010 to this past October, he was the director of intercollegiate athletics at University of Michigan.

Brandon left his post at the college following a series of issues that caused uproar, including a decision to allow a quarterback to play following a serious head injury.

But Brandon’s hiring seemed to perk up investors and the company’s bonds followed suit.

One trader deemed the 7 3/8% notes due 2018 up a quarter-point at 77. Another market source placed the issue at 77 bid, up half a point.

Toys “R” Us is based in Wayne, N.J.

Peabody mixed

A trader said Peabody Energy’s bonds “continued to drift a little bit,” despite a positive report from analysts at Sterne Agee CRT and Cowen.

The trader saw the 6% notes due 2018 slipping half a point to 66¾.

However, another source called the 6½% notes due 2020 inching up a touch to 50¼ bid.

As for the company’s equity (NYSE: BTU), it came up from the day’s lows after the analysts’ report, closing off 18 cents, or 5.22%, at $3.27.

The low of the day was $3.05.

On Monday, the St. Louis-based coal producer said that it was spending the week meeting with various analysts and investors. Analysts from Sterne Agee CRT and Cowen were among those meeting with Glenn Kellow, CEO, on Tuesday and they walked away from the meeting optimistic.

“We found Peabody’s newly appointed CEO Glenn Kellow focused and confident regarding his ability to effect meaningful change throughout the organization,” Sterne Agee analysts Michael Dudas and Satyadeep Jain said, according to Barron’s. “We sensed some urgency in his responses to our questions, especially addressing Peabody’s ability to generate EBITDA, excess cash and drive value through operational productivity and high-grading its asset portfolio.

“Macro headwinds remain fierce, but recent pricing/demand trends should accelerate global production rationalization.”

Cowen analysts Daniel Scott and Bryan Bergin meantime pointed to the company’s favorable positioning.

“The key here is the favorable location of Peabody’s coal operations,” the analysts said. “Its U.S. thermal operations based in the low-cost Powder River Basin and Illinois Basin will continue to supply power generators over the long-term. It also maintains the benefit of Australian-based met production. As marginal met producers in the U.S. fall by the wayside, Peabody should benefit and this will be enhanced as uneconomic hedges roll-off through 2017.”

Additionally, Peabody announced that it opted to reduce production at its North Goonyella mine in Queensland, Australia by 1.5 million tons.

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