Cloud Peak Energy jumps on exchange offer news; Intelsat retreats; Fannie, Freddie preferreds fizzle

By Stephanie N. Rotondo

Seattle, Sept. 12 – The first trading day of the week began with a lower tone, traders reported Monday.

However, things started to turn up towards the end of the day.

“There was a big swoon in the morning, then a lot of stuff came roaring back with stocks,” a trader said.

“In general, things were quoted down early,” another trader said. “But then they came back with the market.

“There is still a lot of eyeballs on new issues,” the trader added.

One name that got a sizeable boost for the day was Cloud Peak Energy Inc. The Gillette, Wyo.-based coal producer said Monday that it was exchanging up to $400 million of its existing notes for new 12% second-lien notes due 2021. In response, the bonds “were up a bunch,” a trader said.

Another name that was up more than average for the day was Viking Cruises. A trader said the 6¼% notes due 2025 improved 5 points to 84½.

“Those haven’t traded in eons,” the trader said, and there was no fresh news to cause such a move.

As for the day’s downers, Intelsat SA debt remained modestly weaker. One trader said it was a continuation of Friday’s trend, when the company said the in-service date for its Intelsat 33e satellite would be delayed.

Cloud Peak plans swap

Cloud Peak Energy’s 8½% notes due 2019 jumped 10 to 12 points on the day on news the company was swapping the debt – as well as the 6 3/8% notes due 2024 – or new 12% second-lien notes.

One trader called the issue up 10 points at 75, though he noted that “one trade even took place at 80.”

Another trader said the 8½% notes were 12 points higher at 76. He noted that the 6 3/8% notes were up only 3 points, trading in a 56 to 57 context.

He said the disparity between the gains was because the $300 million of 8½% notes were first priority in the tender.

Under the terms of the exchange, holders of the 8½% notes will receive $840 of the new notes, plus $53 in cash if tendered by the early deadline. Holders of the 6 3/8% notes will receive $632 of new notes, plus a cash payment of $40.

The offer is contingent upon $200 million of the 8½% notes being tendered.

The early deadline is 5 p.m. ET on Sept. 27.

Intelsat loses thrust

Intelsat bonds continued to lose altitude on Monday.

One trader saw the 7¼% notes due 2020 and the 7½% notes due 2021 sliding a point to 76 and 74½, respectively.

He also saw the 5½% notes due 2023 dipping a shade to 68¼.

At another desk, a trader said the debt was weaker, placing the 7¼% notes due 2019 at 79 and the 7¼% notes of 2020 at 76½.

He added that the “luxco” paper was trading “closer to 29,” which he said was off “another half a point.”

On Friday, the Luxembourg-based commercial satellite services provider said its Intelsat 33e satellite – which was successfully launched Aug. 24 – was suffering from a malfunction of its primary thruster. As such, the in-service date was pushed back to the first quarter of 2017 from the end of 2016.

Intelsat is working with Boeing, the manufacturer of the satellite, to figure out the problem.

The woes of Fannie and Freddie

Fannie Mae and Freddie Mac preferreds were under pressure on Monday, following news out on Friday of another court case being thrown out.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) dropped 42 cents, or 10.99%, to $3.40. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) declined 43 cents, or 11.98%, to $3.16.

On Friday, U.S. District Court Judge Karen Caldwell dismissed yet another shareholder lawsuit that alleged the government’s net worth sweep of nearly all of Fannie and Freddie’s profits was illegal. In her dismissal, Caldwell said that “the legislation bars the courts from interfering with the conservator,” a market source explained.

This is not the first time such a suit against the government has been thrown out. In fact, Caldwell’s dismissal largely echoes the ruling of U.S. District Court Judge Royce Lamberth in October 2014.

“It’s one big litigation mess,” a source said. Of the various cases brought by stakeholders against the government in regard to its treatment of the GSEs, “so far it’s two-thirds for the Treasury, one-third for investors.”

Still, Caldwell’s ruling will likely be appealed. If not, the decision could help another shareholder case before the U.S. Court of Federal Claims. The crux of that case is that the sweep amounts to the taking of property.

© 2015 Prospect News.
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