Frontier, Community Health, Tesla fall on numbers; oil and gas names surge; J.C. Penney gains as Toys falls

By Paul Deckelman

New York, Nov. 1 – The new month of November began on Monday with traders and investors in distressed debt and debt of other underperforming companies carefully watching the parade of companies reporting quarterly earnings.

The news on the earnings front was bad at such varied companies as telecom provider Frontier Communications Corp., hospital operator Community Health Systems Inc. and electric car manufacturer Tesla Inc., all of whom reported disappointing quarterly numbers and saw their respective bonds fall.

On the upside, energy credits such as California Resources Corp. and Denbury Resources Inc. firmed smartly – even though world crude oil prices finished on the downside Wednesday after recently surging.

In the struggling retail sector, J.C. Penney & Co, Inc.’s recently beleaguered bonds saw something of a rebound on Wednesday.

But there was no such relief in sight for bankrupt Toys ‘R’ Us Inc.’s hard-pressed paper.

Frontier paper falters

Traders said that much of the day’s activity was focused on companies which were reporting quarterly results on Wednesday.

One such name was Stamford, Conn.-based telecommunications provider Frontier Communications Inc., with one trader lamenting that its paper “was down anywhere from 3½ to 4½ points,” on the day following its earnings report.

He saw the company’s 11% notes due 2025 off by some 4¾ points on the day, closing at 81½ bid, with over $48 million having changed hands during the session.

He said that Frontier’s 10½% notes due 2022 were likewise getting hammered, losing some 3½ points to finish at 84¼ bid, on volume of more than $24 million.

“It was the most that those bonds have fallen in a year, said another trader, who saw Frontier’s 9% notes due 2020 down a deuce on the day at 88½ bid.

Frontier’s Nasdaq-traded shares lost around 25% of their value, on volume that was more than 10 times the norm.

Frontier’s bonds and shares swooned after the company reported that its per-share net loss had ballooned out to $1.19 per share from just 4 cents a share of red ink a year ago; the loss figure was also worse than the analysts’ expectations of around a $1.15 loss. With many customers dropping their service – a phenomenon that is affecting all established telephone, internet, cable and satellite companies – revenues stayed flat at around $2.25 billion.

Community Health has a relapse

Another, even bigger loser was Community Health Systems, whose bonds and shares took it on the chin after the Franklin, Tenn.-based hospital operator reported a third-quarter loss of $110 million in its third quarter.

On a per-share basis, that works out to 98 cents, or 77 cents on an adjusted basis excluding one-time items.

That was more than double the roughly 30 cents of red ink Wall Street had been looking for,

Its quarterly revenues of $3.67 billion fell far short of $3.72 billion analysts had been anticipating.

Accordingly, a trader said, “it’s getting crushed,” with the company’s 6 7/8% notes due 2022 plunging more than 6 points on the day, down to the 67 bid mark, on volume of over $29 million.

Its 7 1/8% notes due 2020 “really got whacked,” the trader said, collapsing down to 78 bid, a loss of 9 points on the day, with over $10 million traded.

“It was just a bloodbath,” he exclaimed.

Tesla trades off

Palo Alto, Calif.-based Tesla Inc.’s 5.3% notes due 2025 ended down 1½ points, falling below the 95 bid figure, with over $30 million traded.

The electric car manufacturer reported a $619 million quarterly loss, and admitted that it will not meet its previously announced ambitious production targets for its Model 3, having to push its goal of 5,000 vehicles a week back to early next year instead of by the end of the current year.

Energy names improve

Away from companies reporting earnings, a trader saw oil and gas names mostly better – even recently surging crude oil prices finished lower on Wednesday, in contrast to Tuesday’s advance.

December-delivery West Texas Intermediate crude eased by 8 cents a barrel, to $54.30 on the New York Mercantile Exchange, but the trader noted that “oil had gotten up above $55 for a while,” touching a high of $55.22 before falling back below $55 – enough to give the energy sector a psychological boost.

Los Angeles-based exploration and production company California Resources’ 8% notes due 2022 saw “pretty heavy volume” of over $49 million, topping the Most Actives list.

He saw the notes get as high as 68¼ bid before coming off that peak level to finish around 67½ bid, “still up 1½ points on the day.”

Plano, Texas-based E&P operator Denbury Resources’ 5½% notes due 2022 gained nearly 1½ points to end just below 65 bid, as more than $17 million traded.

Retailing names mixed

A trader said that J.C. Penney’s bonds, – recently under pressure after the Plano, Texas-based department store operator issued bearish sales and earnings guidance – “saw a bounce back today.” With its 5.65% notes due 2020 ending up ¾ point on the day at 88½ bid and its 5 7/8% notes due 2023 ¼ point better at 95½.

But bankrupt Wayne, N.J.-based specialty retailer Toys ‘R’ Us’ 12% secured notes due 2021 lost 1¼ points, to close at 94½ bid.

Its unsecured 7 3/8% notes due 2018 were down 2 points on the day at 40 bid.

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