CF drops on quarterly results, credit news; Peabody asset sale sparks uptick; Resolute Forest stumbles

By Colin Hanner

Chicago, Nov. 3 – Oil continued to slump to further lows – bringing distressed energy bonds down with it – and weak quarterly results from CF Industries Inc. and others defined activity in distressed-land on Thursday.

Traders turned to nitrogen and fertilizer manufacturer and distributor CF Industries Inc. after it announced its third-quarter results late Wednesday, a loss for the first time in more than six years from falling prices in the fertilizer sector due to excessive supply.

“Due to the uncertain duration of the current low price environment, the company has made and is making certain changes to parts of its debt capital structure to put in place financing more consistent with the current business and operating environment,” the company said in a release.

Several traders saw decline in its notes, and one trader said it was especially so because the company’s revolving credit facility was cut to $750 million from $1.5 billion.

That pending revolving credit facility was rated a BBB- by Fitch Ratings, with a recovery rating of RR1.

The most actively traded of its notes were the 3.45% notes due 2023, which traded 100 times Thursday, according to one trader, and were down 4½ points to 89.

Market sources said the 5.15% notes due 2034 were down 5 points to 84 5/8.

The 4.95% notes due 2043 traded down 3½ to 88½, and the 5 3/8% notes due 2044 down were down 2¾ points to 83¼.

CF Industry Holdings, Inc. plans to redeem $1 billion principal amount of CF Industries’ senior notes due 2022, 2025 and 2027 at a make-whole premium of about $210 million using proceeds of a new long-term debt issue.

On the upswing

Coal company Peabody Energy Corp. announced that one of its Australian subsidiaries has entered a definitive agreement to sell its Metropolitan Mine in New South Wales, Australia to South32 Ltd. for $200 million in cash.

“This sale supports our actions to strengthen the Australian portfolio ... generate meaningful proceeds for the Australian business, decrease future capital expenditure needs, and reduce risk to the Australian platform as we pursue a smaller but more profitable portfolio going forward,” said Peabody president and chief executive officer Glenn Kellow in a release.

That sale seemed to cause some higher movement in the coal company’s notes, which climbed definitively after stumbling during the past week.

The 6½% notes due 2020 were up 1½ points to 46¾, a market source said, while a trader had the same notes ¼ point higher at 47.

Trading as high as 47 were the 7 7/8% notes due 2026, which ended the day 1½ points up to 46, a market source said.

The 6% notes due 2018 saw several intraday swings – between 44 and 47 – but ended the day at 46 5/8, up 2½ points on the day.

Rounding out Peabody were the 6¼% notes due 2021, which were up 1½ points to 46½, and the 10% notes due 2022, which were up 3 points to 75.

Oiling down

News of an expanding oil glut on Wednesday, coupled with the looming decision of the Organization of Petroleum Exporting Countries to cut supply at the end of the month, caused oil to drop for the fourth-straight day, bringing some distressed notes further down for the week.

West Texas Intermediate crude was down 67 cents, or 1.48%, to $44.67.

Brent crude was down 48 cents, or 1.02%, to $46.38.

CGG SA’s 6½% notes due 2021 were down 1½ points to 46, a trader said.

The company’s 6 7/8% notes due 2022 traded down 2½ points to 46.

Plano, Texas-based Denbury Resources’ 6 3/8% notes due 2021 were down 1 point to 79¼, a market source said, because of its third-quarter earnings, which were released Thursday.

The petroleum and natural gas explorer and producer repurchased $30 million principal amount of senior subordinated notes for $21 million on Thursday, as well as reduced its credit facility by $60 million, according to a release for the company’s third-quarter earnings.

Stone Energy Corp.’s 7½% notes due 2022 were down 2 points to 58½.

A trader said that EP Energy Corp.’s 6 3/8% notes due 2023 were up ½ point to 63½, breaking the overall trend of the day.

In health

“Quorum finally stopped going down,” a trader said Thursday, referring to the downward pattern Quorum Health Corp. has been experiencing on the coattails of Community Health Systems, Inc.

Quorum’s 11 5/8% notes due 2023 were unchanged at 69¾, a trader said.

Community Health’s 8% notes due 2019 were up ¼ point to 86, a market source said, and the 6 7/8 due 2022 were also up ¼ point, though they settled at 75½.

Concordia International Corp.’s 9½% notes due 2022 traded down ¼ point on a dozen trades to 60½, a market source said.

Valeant Pharmaceuticals International Corp., which announced a possible sale of not only its stomach-drug business for $10 billion, but of its eye-surgery business for a possible $2.5 billion, saw a ¾-point decrease in its 6 1/8% notes due 2025, which settled at 80 on “a bunch of trades,” a trader said.

The Wall Street Journal reported on the possible efforts of the company to unload its assets to alleviate its existing debt.

Round up

Besides CF Industries, Resolute Forest Products Inc. was perhaps the other biggest decliner of the day, specifically in its 5 7/8% notes due 2023, which traded down 3¼ points to 80½.

The pulp and paper company posted its third-quarter results on Thursday, netting $14 million in income, a year-over-year improvement.

Resolute’s stock was down 45 cents, or 10.11%, to $4.

Intelsat SA’s Jackson-linked 7¼% notes due 2019 were up ¾ point to 78¼, a market source said, while a trader quoted the 7¼% notes due 2020 up 1 point to 72½.

One trader said that Intelsat papers were rebounding on the day, especially the 5½% notes due 2023, which were up 1 point to 65½.

Rounding out Intelsat were the 7½% notes due 2021, which were up ½ point to 71½.

iHeartMedia, or Clear Channel Communications Inc., saw a 1-point uptick in its 9% notes due 2021, which settled at 70¾.

One trader said that for-profit university and college company Laureate Education Inc.’s 9¼% notes due 2019 traded around 89 but remained unchanged on the day.

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