CGG bonds weaker on earnings miss; Nuverra debt pressured by larger loss; Genworth cut to junk

By Stephanie N. Rotondo

Phoenix, Nov. 7 – A round of earnings Friday pushed several names downward, one distressed debt trader reported.

One name was CGG SA, a seismic data services provider for the oil and gas industry. A trader said the company’s debt had popped on Thursday as certain covenants were eased. But earnings out Friday missed expectations and the bonds fell over 2 points.

Nuverra Environmental Solutions also reported earnings – on Thursday – and the disappointing figures pushed the paper down about 6 points from the last trades seen two to three weeks ago.

Meanwhile, Genworth Financial Inc.’s bonds were “starting to come into us,” a high-yield trader said, noting that the name had previously been traded solely on the investment-grade desks. But a round of weak earnings earlier in the week – followed by a round of ratings downgrades – put pressure on the debt.

But the news wasn’t bad for every name.

Sears Holding Corp. is reportedly considering selling off 300 of its stores to a real estate investment trust in an effort to raise cash. That news helped the company’s debt gain ground.

CGG numbers disappoint

A trader said CGG’s 6½% notes due 2021 traded off of their recent highs Friday following an earnings announcement that missed expectations.

“They’ve been trading off with all of the oil and gas stuff,” the trader said. On Thursday, he said, the company’s covenants were eased, which pushed the bonds up to a high of 84.

Come Friday, the weak earnings took away more of those gains, as the bonds fell over 2 points to 81 5/8.

For the third quarter, CGG reported a net loss of 30 cents per share. That compared to expectations of a 4-cents-per-share profit.

In other oil and gas related names, Samson Investment Co.’s 9¾% notes due 2020 closed up almost 2 points at 75.

Nuverra under pressure

Nuverra Environmental Solutions was “in the news,” a trader said, reporting earnings on Thursday that disappointed investors.

The trader saw the 9 7/8% notes due 2018 at 89 5/8, which was down from levels around 95 two to three weeks ago.

The provider of environmental solutions posted a loss of $5.44 per share for the third quarter.

Analysts’ had been expecting a loss of 26 cents per share.

Revenue was $139.6 million, versus estimates of $138.4 million.

In the previous year, Nuverra reported a loss of 78 cents per share. Revenue increased 5.9% year over year.

Prior to the earnings release on Thursday, the Scottsdale, Ariz.-based company announced that Jay C. Parkinson, chief executive officer, was leaving the company to pursue other opportunities.

Parkinson will stay on through March 31 to assist in with an orderly transition.

In the interim, Christopher Chisholm, chief accounting officer, will take over the role of CFO.

Genworth cut to junk

Genworth Financial’s credit rating was cut to junk by Standard & Poor’s on Friday, following the company dismal earnings report on Wednesday.

Following the ratings cut, Genworth said it would be working to shore up its financial position.

Moody’s Investors Service meantime placed the company on watch.

A trader saw the 6.15% notes due 2066 dropped 6½ points to 65½.

On Wednesday, Genworth posted an $844 million loss, due in large part to a $345 million charge in regard to the underpricing of some previous long-term-care insurance offerings.

S&P dropped Genworth’s rating to BB+ from BBB-, effectively dropping the company into junk territory from investment grade status.

Gimme Credit LLC also downgraded the company, pushing it to “deteriorating” from “stable.”

“The company insists it is looking at various actions that will mitigate the impact of higher loss assumptions will have on all [“active lives”] accounts,” wrote analyst Kathleen Shanley. “But raising prices takes time, since Genworth must obtain regulatory approval on a state-by-state basis.”

Sears’ debt gains

Sears’ 6 5/8% notes due 2018 were “better,” a trader said, as the company sought more ways to raise cash.

The trader said the paper was quoted at 93 bid, 95 offered, with most trades occurring in a 93 to 93½ range.

The company’s stock (Nasdaq: SHLD) meantime rose $10.14, or 31.04%, to $42.81.

The struggling Hoffman Estates, Ill.-based retailer said Friday that it could sell up to 300 of its stores to a REIT, who would then lease the stores back to Sears. Shareholders would get the opportunity to buy stock in the REIT proportionate to their Sears’ equity holdings.

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