Linn Energy, Cloud Peak, Swift deemed the day’s big commodity losers; AMD sees revenues plunge

By Stephanie N. Rotondo

Phoenix, July 17 – Distressed commodity names failed to gain ground on Friday, as oil prices continued to weaken on oversupply concerns.

“A lot of these things are down a ton of points [today] and they were already down a ton,” a trader said. “This stuff can’t get out of its own way.”

Linn Energy LLC was hit particularly hard. Its stock has been getting hammered all week after stock picker Jim Cramer said on his show “Mad Money” on July 10 that he would not recommend the company’s equity, given his belief that its future is “hampered.”

On Thursday, a Seeking Alpha article urged investors to be cautious of the “siren song” of the equity, with trades with a yield over 15%.

In Friday trading, Linn’s debt dropped as much as 10 points, according to one trader.

He called the 7¾% notes due 2021 off nearly 6 points at 61½, while the 6¼% notes due 2019 weakened a full 6 to 63, on “a lot of trades.”

The 6½% notes due 2019 meantime declined just over 10 points to 64, the trader said.

At another desk, Linn’s 7¾% notes were pegged at 61½ bid, off a sixer.

As for the stock (Nasdaq: LINE), it lost 40 cents, or 5.43%, ending at $6.96.

But Linn wasn’t the only big loser in the commodity space on Friday.

A trader said Cloud Peak Energy Inc.’s 8½% notes due 2019 fell over 8 points to 71.

Those declines came after the Gillette, Wyo.-based coal producer released its second quarter shipments and updated its annual EBITDA guidance late Thursday.

Shipments from the company’s three mines dropped to 16 million ton from 20.6 million tons the year before. Preliminary quarterly data is putting net loss for the quarter between $52 million and $54 million, the company said in a press release. Adjusted EBITDA for that time period is forecast between $10 million and $12 million.

For the full year, Cloud Peak lowered its adjusted EBITDA expectations to $110 million to $140 million, representing a $10 million decline at the upper end.

And the commodity weakness didn’t stop there. Swift Energy Co. saw its 8 7/8% notes due 2020 dropping again. The bonds had started to lose ground on Thursday when the company announced it had pulled a $640 million loan offering due to poor market conditions.

A trader saw the issue at 32¾, down 5 points on the day.

In response to the nixed deal, Standard & Poor’s downgraded Swift’s corporate credit rating to CCC from B- and its senior unsecured debt to CCC from CCC+.

The rating agency said that without the new financing, it did not believe Swift could handle its near-term liquidity issues.

AMD weak post-earnings

Commodity-linked bonds weren’t the only losers on the day. Advanced Micro Devices Inc. paper came in after the company released its second-quarter earnings late Thursday.

A trader said the 7¾% notes due 2020 weakened almost 2 points to 75½, while the 6¾% notes due 2019 fell 5½ points to 79.

Another source placed the 7½% notes due 2022 at 76½, down 2½ points.

Net loss for the quarter was $181 million, or 23 cents per share, as revenue for the period dropped 35% to $942 million.

Net loss for the same quarter of 2014 was $26 million, of 5 cents per share, on revenue of $1.44 billion.

On an adjusted basis, the loss per share was 17 cents, in line with analysts’ expectations.

The Sunnyvale, Calif.-based chipmaker had warned earlier in the month that it would likely not meets its previous forecasts for the quarter. However, in its earnings release, it did not that revenue for the third quarter is expected to improve 3% to 9%.

“While the second half [of the year] may not be as bad, we still expect a hugely negative year,” wrote Gimme Credit LLC analyst Dave Novosel in a note released Friday. “although liquidity is not a major concern at this point, with cash and equivalents of $830 million, it could become an issue quite shortly, depending on the cash burn over the next few periods.”

Novosel went on to say that while management asserted that it could still access the capital markets should it need to, if market conditions were to go south, that might no longer be true.

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