Distressed metals, mining names rally; Intelsat bonds spiral downward on earnings, hiring of advisers

By Stephanie N. Rotondo

Seattle, Feb. 22 – With the broader markets trending upward on Monday, distressed bonds were also largely better on the day.

In particular, metals and mining names were benefitting from a rally in commodity-linked stocks. For instance, Freeport-McMoran Inc.’s debt improved about 2 points on the day, according to a trader.

He saw the 2 3/8% notes due 2018 closing up over 2 points at 78¾, while the 3.55% notes due 2022 gained nearly 3 points to end at 57¼.

The 3 7/8% notes due 2023 rose a deuce to 56¼, the trader said.

FMG Resources Ltd. was another commodity name that moved up. A market source pegged the 6 7/8% notes due 2022 at 68, a gain of 2 points.

Even struggling steel producer AK Steel Holdings Corp. finished the day with a firm tone.

One trader saw the 7 5/8% notes due 2021 adding a point to close at 38 7/8. Another source placed the 7 5/8% notes due 2020 at 43½, up 3 points.

But the real focus of the day was Intelsat SA, which released its fourth-quarter results on Monday. While the earnings were mixed compared to analysts’ forecasts, word that the company had hired Guggenheim Securities to look into “financing and balance-sheet initiatives” really drove the company’s debt downward.

Intelsat trades heavy

A trader said it was “kind of ugly” in Intelsat bonds in Monday trading.

The trader said the debt was “pretty active and lower,” with the paper losing 8 to 10 points on the day.

He saw the 7¼% notes due 2019 ending at 78½. The 7½% notes due 2021 also closed in the mid-70s, he said, while the “luxco” bonds – such as the 7¾% notes due 2021 – traded into the high-20s.

At another desk, a trader said the name was the “most actively traded” of the day. He deemed the 5½% notes due 2023 off nearly 8½ points at 67 and the 7¼% notes due 2020 down almost 8 points to 75.

The 7½% notes of 2021 meantime declined 9 points to 74, he said, as the 7¼% notes due 2019 fell 10 points to 77½.

For the quarter, the Luxembourg-based satellite services provider posted income of $49.1 million, or 42 cents per share. On an adjusted basis, EPS was 55 cents.

Revenue for the quarter came to $571.3 million.

Analysts had forecast adjusted EPS of 31 cents per share on revenue of $571.5 million.

For the year, Intelsat reported a profit of $242 million, or $2.06 per share. Revenue was $2.35 billion, down 2.4% year over year.

Adjusted EBITDA was 79 cents, about in line with the previous year.

Looking ahead, Intelsat is projecting full-year revenue between $2.14 billion and $2.2 billion.

In addition to releasing its results, the company also announced that it had hired Guggenheim to look into ways to shore up its balance sheet. The company was not specific on what possibilities it was considering, but it did note that the hiring of the adviser was not a precursor to bankruptcy.

As of Dec. 31, Intelsat had debt of $14.6 billion. The company maintained that its liquidity buffer was sufficient, given that it has an untapped revolving credit facility.

On the heels of the news, Standard & Poor’s placed Intelsat on CreditWatch with negative implications, citing the lower-than-expected revenue forecast for 2016.

© 2015 Prospect News.
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