Peabody weaker on natural gas report; Quiksilver bonds take hefty hit; Fannie, Freddie rebound

By Stephanie N. Rotondo

Phoenix, June 11 – A couple distressed credits were getting knocked around in Thursday trading, even as the rest of the market rebounded from losses throughout the beginning of the week.

Peabody Energy Corp. was one such name. However, a trader said the bonds recovered from their intraday lows, but still ended with a negative tone.

One trader deemed the debt off as much as 5 points.

Meanwhile, Quiksilver Inc. paper took a pretty serious hit. The clothing manufacturer and retailer reported disappointing earnings earlier in the week and pulled its forward-looking guidance as a result.

But one trader said the drop only confirmed where levels had been quoted.

Peabody takes a beating

Peabody Energy bonds were weaker again in Thursday trading.

“They were quite active,” a trader said. “The stock was getting hammered.”

The trader saw the 6¼% notes due 2021 falling 3 points to 41, while the 10% notes due 2022 dropped 3½ points to 65¼. The 6½% notes due 2020 were meantime off a deuce at 43½, as the 6% notes due 2018 lost nearly 5½ points, closing at 53.

The trader deemed the 7 7/8% notes due 2026 steady at 41¾.

The trader said the day’s declines were due to a new report that showed U.S. natural gas stockpiles had grown.

Peabody debt was “definitely all over the place,” another trader said.

“From the get-go,” the 10% notes traded down into the mid-60s, he said, hitting lows in a 60½ to 61½ context. But the paper rebounded “a little bit” to close in a 64 to 65 zip code.

“That’s definitely down a couple points,” he said.

As for the unsecured notes due 2021, they traded “as low as 37,” the trader said.

As for the company’s stock (NYSE: BTU), it closed down 43 cents, or 13.4%, to $2.78, a new 52-week low.

On Monday, the St. Louis-based coal producer said it was cutting 250 jobs and shutting two of its offices in an effort to save costs. The plan is expected to result in savings of $45 million annually.

Quiksilver bonds take dive

A trader said Quiksilver’s 10% notes due 2020 saw a decline of 22 points in Thursday trading, with the paper closing at 49.

The trader noted that the bonds last traded in a round-lot on March 30 at 71½.

But another trader said the debt has been quoted lower ever since the company reported dismal earnings on Tuesday.

“It hasn’t traded in awhile,” the trader said. “It was quoted 45 to 50 after the numbers, but this is the first trade.

“So I guess that confirms the level.”

That trader also pegged the issue around 49.

For the quarter, Quiksilver reported a net loss of $37.6 million, which was narrower than the $53.1 million loss seen the year before.

On a per-share basis, the loss was steady at 22 cents.

Revenue declined to $333.1 million from $397 million.

Analysts polled by Thomson Reuters had predicted a loss of 14 cents on revenue of $341 million.

The company attributed the soft quarter to ongoing logistics issues.

Previously, the San Francisco-based company had forecast a return to profitability in North America in the second half of the year.

The company has not turned a profit in two years.

Fannie, Freddie gain ground

Fannie Mae and Freddie Mac preferreds easily dominated trading again on Thursday and also saw a rebound following the previous day’s losses.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 21 cents, or 5.5%, to $4.03 on over 3.5 million shares trading. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) meantime improved 20 cents, or 5.24%, to $4.02, with 8.66 million shares being exchanged.

On Wednesday, the preferreds had drifted lower and, according to a market source, it was due to a couple of research reports that were circulating.

However, the source remarked that the reports did not contain “a lot of new information.”

In the report out Wednesday, analysts at SNL Financial warned that a decline in profits, combined with a winding down of their portfolios and capital reserves, could place Fannie and Freddie back where they were at the height of the financial crisis.

But as the source noted, that in and of itself is not new information. In 2012, the Treasury Department made an amendment to its conservatorship agreement with the mortgage giants, effectively taking most of their profits. In doing so, the government took away the agencies’ ability to save for a rainy day, as it were.

Several investors have sought to fight the amendment and lawsuits are currently pending.

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