Off-the-run distressed names see more action; Fannie, Freddie preferreds in decline

By Stephanie N. Rotondo

Seattle, Dec. 2 – A distressed debt trader noted Wednesday that several off-the-run names were trading actively during the session.

For instance, Associated Materials Inc.’s 9 1/8% notes due 2017 were trading, falling down to just north of 73.

That compared to levels around 81 a month ago, the trader said.

“You don’t see that one every day,” he said.

Rex Energy Corp. was another rarely traded name that was busier than usual, the trader said.

He saw the 8 7/8% notes due 2020 ending at 24¾. He noted that the bonds’ price had been “cut in half” since the last trades in early November.

Allegheny Technologies Inc.’s 5.95% notes due 2021 were also included on the list.

“There always seems to be sellers of that,” the trader said. However, he added that “you can never find a bid.”

That paper drifted down 1½ points to 77¼.

Of the more on-the-run stuff, AK Steel Holdings Corp.’s 7 5/8% notes due 2020 were “pretty active,” according to a trader.

The trader saw the debt dropping nearly 4 points to 36¾.

Fannie, Freddie selling off

One trader noted that the sell-off in Fannie Mae and Freddie Mac paper “seems to continue,” adding that the decline has “been pretty steady for the past two weeks.”

The losses have “been substantial,” the trader said. For some issues, the drop has amounted to as much as 30%, though on average he speculated that the paper has drifted down around 20% in the last couple of weeks.

“I’m not sure why, and it’s been on light volume,” he noted.

Still, the trader remarked that ongoing litigation – including a pending case in Iowa – could be the root of the problem.

Shareholders have several cases pending against the GSEs, as well as the federal government. Most center on the government’s 2012 conscription of a majority of the agencies’ profits.

Regardless of what is causing the weakness, the trader opined that “we will probably see them weaken until the end of the year or until some decent buyers come in.”

He noted that he “would be a buyer” of the preferreds around $3.75 a share.

Fannie’s 8¼% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) closed off a dime, or 2.44%, at $4.00. The preferreds were down 13 cents, or 3.17%, at $3.97 in early trading. Freddie’s 8 3/8% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) meantime fell 12 cents, or 2.93%, ending at $3.98. Those shares were off 15 cents, or 3.66%, at $3.95 at mid-morning.

Goodrich, sector softens

Goodrich Petroleum Corp., which is exchanging its convertible and non-convertible preferred stock, said Tuesday that it was suspending dividends on all those issues for the fourth quarter.

Come Wednesday, the 10% series C cumulative preferreds (NYSE: GDPPC) and the 9¾% series D cumulative preferreds (NYSE: GDPPD) were declining.

The Cs closed off 16 cents, or 15.53%, at 87 cents. The Ds finished off 11.4 cents, or 11.79%, at 85.2 cents.

The dividends will accumulate until paid in full. If the Houston-based oil and gas company fails to pay the dividend for six quarters – consecutive or otherwise – holders of each series can add an additional director to the board.

As previously reported, Goodrich is seeking to exchange up to 2.39 million shares of each of the series C and D preferreds, as well as all of the 5 3/8% series B cumulative convertible preferreds. Those that participate in the exchange will receive new 10% series E cumulative convertible preferreds.

Elsewhere in the oil and gas space, a trader said oil names were “a little weaker.”

Breitburn Energy Partners LP’s 8¼% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were down 66 cents, or 7.41%, at $8.25.

The company announced earlier in the week that it was cutting its common unit distribution, though it did declare monthly distributions for the series A and B preferreds units. The series A distribution will be paid in cash, while the Bs’ distribution will be paid in kind.

Meanwhile, Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) closed down 59 cents, or 5.83%, at $9.53.

As for crude oil prices, those were also softer on the day, falling below $40 briefly before ending just north of that mark.

The weakness came as the U.S. Energy Information Administration said crude stockpiles rose for the 10th straight week.

Analysts had previously predicted a decline.

© 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.