Sprint debt rally continues ahead of numbers; SandRidge slammed on credit draw; Peabody firms

By Stephanie N. Rotondo

Seattle, Jan. 25 – The distressed debt market was a mixed bag on Monday as equities and commodities continued to wane.

Sprint Nextel Corp. remained busy as the market prepares for the company’s earnings release on Tuesday – an event that was moved up a week after investors trounced the bonds and stock on concerns surrounding the company’s turnaround plan. On Monday, the Overland Park, Kan.-based telecommunications provider said it was reducing its workforce – again – as part of its larger plan to cut costs by $2.5 billion.

As for the commodity space, oil producer SandRidge Energy Inc. saw its bonds decline after the company said it had maxed out a credit line in order to shore up liquidity.

In the coal arena, Peabody Energy Corp. debt inched higher as the company disclosed details on its talks with noteholders regarding a potential exchange offer.

Steelmaker AK Steel Holdings Corp. meantime ticked up a touch ahead of its earnings released on Tuesday, though volume in the name was limited, according to traders.

One trader said the 7 5/8% notes due 2020 improved a quarter-point to 35½, while another market source deemed the debt half a point higher at 35 bid.

Away from commodities, retailers were trending positive.

A trader said Men’s Wearhouse Inc.’s 7% notes due 2022 gained over a point on the day, ending at 65.

At another desk, Toys “R” Us Inc.’s 7 3/8% notes due 2018 were seen rising a deuce to 62 bid, as JCPenney Co. Inc.’s 5.65% notes due 2020 moved up 1½ points to 82½ bid.

Sprint earnings ahead

Sprint bonds continued to bounce after getting knocked down last week on concerns about the company’s ability to turn itself around.

A trader said the bonds were “the most actively traded” for the day. He saw the 6 7/8% notes due 2028 ending half a point better at 61¼, while the 7 5/8% notes due 2025 improved just over a point to 64 1/8.

Both the 7 7/8% notes due 2023 and the 6% notes due 2022 were over half a point higher, at 66 and 63 1/8, respectively.

A second trader said Sprint was “the most notable, volume-wise.

“A lot of them seemed like they were moving up a bit,” he said, seeing the 7% notes due 2020 pushing up “a couple points” to a 67½ to 68 context.

Early last week, Sprint’s securities took a tumble. However, by the end of the week, things had started to look up.

Come Monday, the company said it planned to reduce its workforce by 2,500, or about 7%. The reduction is the third to occur in the last two years.

SandRidge ebbs

SandRidge Energy said Monday that it drew down $489 million from a credit line in order to shore up liquidity during a period of depressed commodity prices.

The draw gives the company $855 million in cash on hand, though it means it owes a total of $500 million on the facility.

All told, the Oklahoma City-based oil and gas producer has about $4 billion of debt.

In response to the news, investors pushed the company’s bonds down.

A trader saw the 8¾% notes due 2020 falling 4 points to 19. Another trader said the paper was “down a couple,” trading into the high-teens.

Last month, SandRidge’s stock was delisted from the New York Stock Exchange for its “abnormally low” stock price.

Peabody pops

Peabody Energy is in talks with holders of the 6% notes due 2018 on a potential exchange offer, the company disclosed on Friday.

Come Monday, the market was responding positively to the news.

One trader said the 6% notes experienced a “monster move,” gaining 4 points to close at 14. The 6¼% notes due 2021 meantime improved by over 2 points, closing at 9.

The trader also saw the 6½% notes due 2020 adding “almost a point” to finish at 7½.

Another market source placed the 6½% notes at 8 bid, up almost a point.

Yet another trader said the 6% notes were “better,” moving up to 14 from 10. As for the 6¼% notes, he said those “moved up as well,” trading in an 8 to 9 zip code.

The St. Louis-based coal producer said Friday that it had proposed to the 6% noteholders an exchange that would give said group a combination of 6% secured first-lien notes due 2020, 6% NPP first-lien notes due 2020, 6% NG first-lien notes due 2020 issued by a newly formed subsidiary and common stock.

Noteholders countered the proposed offer, calling for the payment of 50% of accrued interest on the 6% notes in cash and the other 50% in new NG notes. That proposal also slightly shifts how much of the new notes would be issued and some of the terms of the new debt.

© 2015 Prospect News.
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