Coal bonds shake off industry earnings; NewPage debt nonplussed by Verso numbers; Kodak slips

By Stephanie N. Rotondo

Phoenix, Aug. 9 - Investors were again shunning the distressed debt market for new high-yield issues on Thursday.

"It's all these new issues," a trader said as he looked over the day's most actively traded securities.

"There was just a ton of focus on new issues," said another trader. "That's the vast majority of everything."

For those investors dabbling in the distressed space, the general energy space seemed to be the place to be.

Coal names like Alpha Natural Resources Inc. and James River Coal Corp. were on the rise, even as James River and Patriot Coal Corp. announced losses for the second quarter.

For its part, Alpha Natural reported a loss on Wednesday as well.

NewPage Corp. was meantime unfazed by earnings put out by rival Verso Paper Corp. Verso reported a narrower loss for the quarter, though its adjusted net loss was wider, due in large part to a fire and subsequent closure at one of its mills.

And, while not all that active, trader said Eastman Kodak Co. was slipping, a trend that has been going on since earlier in the week when the company said that initial bids for its patent portfolio were less than expected.

Coal takes earnings in stride

The coal sector was surging slightly, despite a round of not-so-fabulous earnings from James River Coal and Patriot Coal.

A trader said Alpha Natural Resources' 6% notes due 2019 were up nearly 3 points at 90, as another market source called the 6¼% notes due 2021 up almost 2 points at 89 bid.

The first trader also saw Arch Coal Inc.'s 7% notes due 2019 gaining 1¾ points to end around 891/2.

However, he said there was "very minimal activity" in James River's 7 7/8% notes due 2019.

"I expected a little more activity than that," he said, given the earnings release.

Still, the bonds were up at least 2 points at 541/2, he said.

There was also very little goings-on in Patriot Coal paper.

For the second-quarter, James River swung to a $25.8 million, or 74 cents per share, loss. That compared to earnings of $789,000, or 2 cents per share, the year before.

Total revenues dropped 21% to $277.4 million. Total coal revenues declined 23% to $232.8 million.

But the numbers were better than the expected loss of 79 cents per share on $274.7 million in revenues.

Meanwhile, bankrupt peer Patriot Coal said its loss was $354.3 million on revenues of $534.1 million for the most recent quarter.

That was much wider than the $49.6 million loss reported the same quarter of 2011. Revenues during that time period were $632.2 million.

Cash and equivalents were $46.01 million as of June 30, versus $194.2 million available as of Dec. 31, 2011.

On Wednesday, Alpha Natural reported a loss of $2.23 billion, or $10.14 per share, due to $2.5 billion in various impairment charges. That compared to a loss of $50.1 million, or 32 cents per share, the previous year.

Analysts polled by Thomson Reuters had been expecting a loss of just 33 cents per share.

Revenues, however, gained 16% to $1.85 billion, helped in part by an 11% gain in coal revenue, which was attributed to a 40% increase in Eastern coal thermal revenue.

Additionally, Alpha Natural reduced its full-year shipment outlook again. The company now expects shipments of 20 million to 23 million tons, versus a top end of 24 million ton previously.

Edison gains, oil slips

Coal wasn't the only energy space investors were checking out Thursday.

Edison International Inc.'s Edison Mission Energy-linked bonds were stronger again, according to a trader.

He called the 7¾% notes due 2016 up to around 55, while the 7½% notes due 2013 inched up to around 57.

He said he had seen no fresh news regarding the Rosemead, Calif.-based power producer.

In the oil arena, ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were "down a scrap" at 37, the trader said.

Another trader said that the bonds of Venezuelan-based Petroleos de Venezuela SA were active, but weaker.

The 8½% notes due 2017 slipped over 2½ points to 86 7/8, on about $40 million traded. The 9% notes due 2021 dipped a point to 80, with about $34 million changing hands.

NewPage bonds not shaken

NewPage's 11 3/8% first-lien notes due 2014 shook off a poor quarterly performance at rival Verso Paper on Thursday.

A trader said the bonds were "not really all that different really" at 67 bid, 69 offered.

Another trader also said the paper was unchanged, quoting the notes at 67½ bid, 68 offered.

Verso's quarterly results were adversely affected by a fire at its Sartell mill in Minnesota over Memorial Day that subsequently resulted in the permanent closure of the mill.

Net loss was $21 million, or 39 cents per share.

The recent figures compared to a net loss of $24 million, or 46 cents per share the year before.

While the net loss was narrowed in the second quarter of 2012, adjusted net loss was $43 million, or 81 cents per share, versus $21 million, or 39 cents per share, the previous year.

Sales fell to $365 million from $399 million.

Ambac up despite loss

In other earnings news, Ambac Financial Group Inc.'s 9½% notes due 2021 and its 5.95% notes due 2035 traded up to levels around 30, a trader said.

The firmness came despite the bankrupt mortgage-insurer reporting a wider second-quarter loss.

Net loss was $811.1 million, or $2.68 per share, which compared to the prior year's loss of $102.4 million, or 34 cents per share.

Net premiums gained 3.8% to $103 million, as net investment income dropped 1.9% to $93.8 million.

Kodak slide continues

Eastman Kodak's debt continued to soften Thursday. The bonds have been declining this week on news that initial bids for the company's patent portfolio were not as high as anticipated.

A trader said the 7¼% notes due 2013 were "weaker although not all that active."

He pegged the issue at 19 bid, 20 offered.

Another trader said the name was "very quiets," with "just odd scraps" trading.

He saw the 7¼% notes around 20 and the 9¾% second-lien notes due 2018 at 79 bid, 80 offered.

A third market source placed the 7¼% notes at 21 bid, down 1½ points on the day.

Kodak is based in Rochester, N.Y.

Hawker loses air

A trader said Hawker Beechcraft Acquisitions Co.'s 8½% and 8 7/8% notes due 2015 traded during the day's session.

He noted that he had not seen the name trade in some time.

"It might be a swap," he said, placing both issues at 171/4. "It was above 20 the last time we saw it trade."

Hawker is a bankrupt Wichita, Kan.-based manufacturer and seller of aircraft.

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