EXCO 7½% notes see 20-point gain on tender results; SunPower under pressure, Fannie, Freddie mixed

By Stephanie N. Rotondo

Seattle, Aug. 10 – EXCO Resources Inc. was the day’s most notable distressed name, not in terms of volume, but in terms of price moves.

The Dallas-based oil and gas company released the early tender results for a previously announced discounted offer for its 8½% notes due 2022 and its 7½% notes due 2018. As of the early deadline – 5 p.m. ET on Aug. 9 – 68.3% of the 8½% notes were validly tendered, while only 17.84% of the 7½% notes had been turned over.

The company said that the results from the 8½% notes resulted in the offer being oversubscribed and that it would accept the notes on a prorated basis.

However, none of the 7½% notes were accepted and no more 8½% notes would be taken in.

As a result, the 7½% notes experienced a sizeable pop for the day.

A trader placed the bonds at 47 5/8, calling that up 20 points from the last trades of size about two months ago.

According to TRACE data, the last round-lots occurred on June 1, straddling 29.

Holders of the 8½% notes that participated in the tender will receive $400 per each $1,000 of notes, including a $45 early tender premium.

Elsewhere in the oil and gas space, California Resources Corp.’s 8% second-lien notes due 2022 managed to move up a bit, despite oil prices retreating below $42 a barrel yet again.

A trader called the paper up over half a point at 61 7/8.

Domestic crude prices weakened on Wednesday as the U.S. Energy Information Administration reported a 1.1 million-barrel build of stockpiles. Analysts polled by Reuters had expected a draw of 1 million barrels.

Gasoline stocks meantime fell by 2.8 million barrels, the second-largest weekly draw since April.

Also pressuring the commodity was reports that Saudi Arabia was producing oil at record highs, furthering concerns about a global supply glut.

SunPower loses steam

SunPower Corp.’s convertible bonds were getting hit in the wake of the company’s earnings announcement on Wednesday.

The release also included news that the company was laying off 1,200 employees.

A trader said the 0.875% convertible notes due 2021 dropped nearly 9 points to 75, while the 4% convertible notes due 2023 declined as much as 14.5 points to 73.5.

The equity (Nasdaq: SPWR) was not faring well either, declining $4.47, or 30.24%, to $10.31.

For the quarter, the solar panel company reported a loss of $70 million, or 51 cents per share. Revenue was $420 million.

On an adjusted basis, loss per share was 22 cents.

Analysts polled by S&P were expecting a loss of $73 million, or 48 cents per share. Once adjusted, expectations were for a loss of 24 cents.

The company also revised its 2016 guidance, forecasting a net loss of $125 million to $175 million. Net loss for 2017 was placed in a range of $100 million to $200 million.

SunPower noted that customer demand was decreasing, given that Congress recently extended a renewable energy tax credit to 2021. Because of that, the company has opted to put off certain projects in 2016 and 2017.

SunPower also said it was shuttering its assembly plant in the Philippines. Equipment located at that site will be transferred to a new facility in Mexico.

The announced layoffs are mostly due to the closure of the Philippines facility.

Fannie, Freddie mixed

Fannie Mae and Freddie Mac preferreds traded actively on Wednesday, though in mixed fashion.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) slipped 4 cents to $4.26, while the 6.55 noncumulative perpetual preferreds (OTCBB: FMCKI) declined 13 cents, or 3.67%, to $3.41.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS), however inched up 2 cents to $4.32.

The market was hoping to hear news this week regarding the mortgage giants’ court cases. In particular, Perry Capital’s case in the Court of Appeals was expected to produce some sort of ruling.

The case alleges that the government’s “net worth sweep” of virtually all of Fannie and Freddie’s profits was illegal. Though a lower court ruled in favor of the government, the hedge fund appealed that ruling.

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