Getty Images debt boosted by new money deal; market digests earnings from U.S. Steel

By Stephanie N. Rotondo

Seattle, Nov. 3 – Distressed debt investors were pushing up Getty Images Inc.’s bonds on Tuesday after a deal for new money was announced.

A trader deemed the 7% notes due 2020 “better,” trading “around 31.”

Late Monday, it was reported that Getty had reached a deal with a bondholder group in which the group would provide $100 million to the company. The company in turn will exchange some of the bonds at 64 cents on the dollar for $252.5 million of 10½% secured notes due October 2020.

The new debt issued as part of the exchange will rank pari passu with Getty’s $1.9 billion bank loan.

“It will improve liquidity,” a trader said of the deal.

The Seattle-based photo imaging company said back in August that it had hired Guggenheim Securities LLC to look into a potential capital raise between $50 million and $100 million.

Elsewhere in the world of distressed, a trader said there was “no reaction just yet” to U.S. Steel Corp.’s third-quarter results, which came out after the market closed.

The earnings “missed by a lot,” the trader noted.

Neither was there a lot of action in sector peer AK Steel Holdings Corp.

“I think everybody is waiting to see what happens with the trade case,” the trader said.

For the third quarter, Pittsburgh-based U.S. Steel reported a net loss of $173 million, or $1.18 per share. That compared to a loss of $207 million, or $1.42 per share, the year before.

On an adjusted basis, net loss was $103 million, or 70 cents per share. Adjusted EBITDA came to $85 million.

In a note published Sunday, Deutsche Bank analyst Jorge Begiristain forecast a loss of 7 cents per share. Thomson Reuters was predicting a loss of 18 cents per share.

U.S. Steel and AK Steel, along with other U.S. steel producers, have filed three anti-dumping trade cases this year, mostly aimed at cheaper imports from countries like China. It was reported Tuesday that the U.S. Department of Commerce was considering taxing some of the Chinese imports as much as 236%, based on preliminary findings.

It is believed that if the tariffs – which would be retroactive – would increase the price for steel, which would be a boon for U.S. producers in a market currently dealing with oversupply.

Freddie posts loss

Freddie Mac reported its first quarterly loss in four years on Tuesday, prompting some to call for federal housing reform sooner than later, according to a trader. The loss means the Treasury has no profits to sweep up either, he said.

“But no one is going to do anything going into elections,” the trader opined.

On the news, GSE preferreds were trading flat to lower at mid-morning but reversed course to finish higher on the day.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) closed up 8 cents, or 1.61%, at $5.05. The preferreds were initially off 7 cents, or 1.41%, at $4.90.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) ended 10 cents higher, or 2.04%, at $5.00. The preferreds were also at $4.90 earlier in the day, which was unchanged.

Freddie posted a net loss of $475 million for the third quarter, which compared to a profit of $2.08 billion the year before.

The swing to the red was due to losses from derivatives used to hedge interest-rate risk. Those losses totaled $4.17 billion, up from $617 million in the previous year.

The uptick in the losses was tied to long-term interest rate declines.

On the plus side, Freddie had positive net worth of $1.3 billion, meaning it would not need to seek more help from the U.S. Treasury.

“Freddie Mac’s reported quarterly earnings loss is accounting driven and does not reflect a deterioration in the underlying health of its business,” Rob Runyan, a Treasury spokesman, said in a statement on Tuesday. “Nevertheless, the prospect of any material losses by the GSEs is another reminder that comprehensive housing finance reform is necessary.”

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