TXU bonds firm as company returns to profit; OGX up on OSX loan refinancing; RadioShack slips

By Stephanie N. Rotondo

Phoenix, Nov. 5 - Distressed bonds had a "slightly weaker tone" on Tuesday, according to one trader.

"I think everyone is focused on earnings and higher quality names," he remarked.

Still, the distressed space was not without its own pockets of activity.

Energy Future Holdings Corp., for instance, was active and mostly better on the day after the company released its full earnings report. On Friday, the power producer said that it had turned its first profit since 2010, but the full report - and subsequent conference call - was not available until Tuesday.

OGX Petroleo e Gas Participacoes SA, the recently bankrupt oil producer in Brazil, also saw its bonds tick up some on news its sister company, OSX Brasil SA, had secured a $175 million refinancing loan. The current lenders on the facility agreed to rollover the debt for another year - 17 days after it had become due and payable.

OSX paper was also ending firmer.

TXU returns to profit

Energy Future Holdings posted its third quarter results on Tuesday, showing its first profit since 2010.

The company had indicated that it would report a profit on Friday in a regulatory filing, though it did not release the full financial details. The company said it had also lined up $4.4 billion in debtor-in-possession financing in case it had to file for bankruptcy.

News of the swing to profit helped the bonds gain ground in Tuesday trading.

A trader saw the 10¼% notes due 2015 linked to Texas Competitive Electric Holdings Co. LLC at 8, which he said was half a point better. He noted that the issue was up decently in terms of percentage.

The trader also saw the Texas Competitive 15% notes due 2021 at 291/2.

And, the 10% notes due 2020 linked to the parent company were "up a scant bit" at 105 1/8.

Another trader also saw the bonds on the rise, pegging the 10% notes at 1051/4.

For the third quarter, the Dallas-based company reported a profit of $5 million. That compared to a net loss of $407 million for the same period of 2012.

Energy Future, or TXU as it is more commonly referred to, said the profit was due to gains in commodities hedging.

The company ended the quarter with about $2 billion in liquidity and about $40 billion in debt. Talks with creditors are continuing, even after the company made a $270 million interest payment on Friday.

Though many believed that TXU would skip the interest payment and simply file for Chapter 11 protections instead, negotiations with stakeholders failed to bring about a consensual restructuring agreement. In making the payment, TXU has gained more time to figure out what to do with its heavy debt burden.

OGX, OSX firm up

OGX's 8½% notes due 2018 "inched up a little," a trader said, on news its sister company, OSX Brasil, had secured a $175 million refinancing loan.

The trader pegged the debt in a 9 to 10 range, while OSX's 9¼% notes due 2015 were quoted at 82 bid, 84 offered.

After OGX sought bankruptcy protections in Brazil last week, there was some concern that OSX - which was created to provide transport vessels for OGX's oil output - would soon follow. It didn't help that OSX had a loan with state-run Caixa Economica Federal and Banco Santander Brasil SA that was past due.

But on Tuesday, OSX was given a lifeline as the lenders agreed to rollover the loan for another year.

Both companies are part of Eike Batista's empire.

RadioShack paper dips

RadioShack Corp.'s 6¾% notes due 2019 softened after the struggling electronics retailer set price talk on its $585 million five-year senior secured ABL revolving credit facilities.

One trader saw the issue at 661/2, which he said was down 1¼ points. Another trader echoed that level, saying that it was "down a little bit."

The $535 million tranche is talked with a grid of Libor plus 200 basis points to 250 bps, based on availability, and a 50 bps unused fee, and the $50 million first-in-last-out tranche is talked at Libor plus 400 bps with no grid, the source said.

The Fort Worth-based company's $835 million credit facility also includes a $250 million secured term loan that is not in market since it was placed with one lender, the source added.

GE Capital Markets, CIT Corporate Finance, RBS Citizens and Salus Capital Partners are leading the financing.

Proceeds will be used to refinance the company's existing $450 million ABL credit facility, $75 million of term loans and $100 million second-lien term loan.

Coal rises on sector upgrade

A trader said the coal sector was continuing to rebound on the back of a Goldman Sachs industry upgrade that came out Monday.

He said Alpha Natural Resources Inc.'s 6¼% notes due 2021 moved up almost a point to 863/4. Among Arch Coal Inc.'s bonds, the 7¼% notes due 2021 increased half a point to 771/4, while the 7% notes due 2019 rose almost half a point to 781/2.

Another market source placed Alpha Natural's 6¼% notes at 86½ bid, which was up 1½ points. Patriot Coal Corp.'s 8¼% notes due 2018 meantime put on 4 points to close at 45 bid.

Sara Rosenberg contributed to this article

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