Goodrich drops as oil prices waiver, earnings on deck; Toys ‘R’ Us rises; Fannie, Freddie fall

By Stephanie N. Rotondo

Phoenix, Feb. 23 – Distressed debt was moving on up Monday, even as oil prices waned and the equity markets drifted lower.

With the decline in oil prices, Goodrich Petroleum Corp. took a hefty hit. The company is slated to release earnings later this week.

At a conference in Miami on Monday, retailer Toys “R” Us Inc. released preliminary figures that showed a slight decline in sales, but a gain in adjusted earnings.

Investors seemed pleased with the numbers and pushed the company’s bonds higher.

In the preferred stock space, Fannie Mae and Freddie Mac paper continued to weaken, as investors reacted negatively to earnings from last week.

Goodrich dives

Goodrich Petroleum was weaker Monday as oil prices declined and investors prepared for the company’s earnings, out later this week.

A trader said the 8 7/8% notes due 2019 fell a point to 41 5/8.

In the preferreds, the 10% series C cumulative preferreds (NYSE: GDPPC) declined $2.09, or 21.57%, to $7.60 and the 9.75% series D cumulative preferreds (NYSE: GDPPD) dropped “big time,” losing $2.16, or 22.91%, to $7.27.

Some members of the Organization of Petroleum Exporting Countries are expressing concern about falling oil prices and are saying that while certain Middle Eastern members are not worried, others are considering an emergency meeting to discuss how to handle the situation.

The members most concerned about the price drops are Nigeria, Venezuela and Russia.

Toys’ debt rises

Toys “R” Us’ debt got a boost Monday as the company presented preliminary quarterly figures at the JPMorgan Global High Yield and Leveraged Finance Conference in Miami.

One trader said the 7 3/8% notes due 2018 rose 2½ points to 66½. Another trader said the bonds were 2 to 3 points higher, placing the 7 3/8% notes at 66 and the 10 3/8% notes due 2017 at 83½.

A third source deemed the 7 3/8% notes up 3 points at 66½ bid.

For the quarter, the Wayne, N.J.-based retailer said net sales fell to $12.4 billion from $12.5 billion. U.S. sales dropped 4.5% and international sales improved 2.2%.

Adjusted EBITDA is expected to be about $57 million.

Among other retailers, Gymboree Corp.’s 9 1/8% notes due 2018 were seen 3 points better at 44, a trader said.

He said there was “no specific news” to cause the gain.

Fannie, Freddie weaken

Fannie Mae and Freddie Mac preferreds remained under pressure following earnings from the government-sponsored entities last week.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OYCBB: FNMAS) declined 13 cents, or 2.77%, to $4.57, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) lost a dime, or 2.2%, to $4.45.

On Friday, Fannie reported fourth-quarter net income of $1.3 billion, which compared to income of $6.5 billion the year before.

Like its peer Freddie, the narrower loss was attributed to losses on investments based on hedges related to interest rates.

Fannie is also planning to make a $1.9 billion dividend payment to the U.S. Treasury. Once paid, the agency will have paid $136.4 billion in dividends to taxpayers – $20 billion more than the firm received during the financial crisis.

Freddie posted its earnings on Thursday, showing net income for the fourth quarter of $227 The GSO said it was planning to make a $900 million dividend payment to the Treasury Department next month – bringing the total amount paid back to $91.8 billion.

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