Cenveo slides on poor earnings; energy names weak, Level 3 loses; other telecoms see a bounce

By Paul Deckelman

New York, Nov 9 – Traders in distressed debt and bonds of other underperforming companies said Thursday was another day of market weakness, with most names lower amidst investor angst over weak earnings and uncertainly about what, if anything, will be coming out of Washington in terms of tax code changes.

Cenveo Inc. was one of the big losers on the day after the company reported third-quarter results that included a sizable net loss versus a year-ago profit, completely missing analysts’ expectations. The news overshadowed a company announcement of an asset sale.

Oil and natural gas company names such as California Resources Corp. and Denbury Resources Inc. lost ground, their bonds not helped by an upturn in world crude oil prices after two straight sessions of decline.

Other losers on the day included names such as Valeant Pharmaceuticals International Inc., Tesla Inc. and Rite Aid Corp.

Level 3 Communications had a particularly big loss on the day.

But other telecommunications operators recently under intense pressure, such as wireline telecommunications providers like Frontier Communications Corp. and CenturyLink, Inc. – Level 3’s new corporate parent – were rebounding from their recent depths.

Cenveo slides on loss

One of the day’s big losers was Cenveo after the Stamford, Conn.-based commercial printing company reported an unexpected loss, which hammered its 6% notes due 2019 down to below 63 bid, a loss of more than 5½ points from where the bonds had most recently traded, last week.

Cenveo swung to a net loss of $28.1 million from a year-ago profit of $9.4 million.

Analysts were looking for per-share earnings around 14 or 15 cents – but were shocked when that figure instead came up as an 82 cent loss.

Sales slid to $329.5 million from $382.7 million a year ago.

Third-quarter adjusted EBITDA fell to $24.3 million from $37.8 million last year.

The numbers overshadowed the company announcement that it had sold its office products envelope business, Quality Park Products, to LSC Communications for an undisclosed sum.

Energy names trade off

Away from the new deal sphere, energy names were generally lower on Thursday despite an upturn in world crude oil prices after two days on the slide.

Sector benchmark California Resources’ 8% notes due 2022 “was one of the more active issues” on the day a trader said, seeing more than $24 million of the Los Angeles-based energy E&P company’s paper trading at 73 1/8 bid, down 3/8 point.

Plano, Texas-based sector peer Denbury Resources’ 6 3/8% notes due 2021 plunged to 70 bid at the close, down 7 points, but a market source said that there was not much volume in the credit, “only a bunch of smallish trades.”

Jones Energy Inc.’s 6¾% notes due 2022 finished down more than a deuce on the day at 76 bid.

The energy credits were off even though oil prices saw their first upturn after two days of losses, with December-delivery West Texas Intermediate crude finishing up 36 cents per barrel in New York Mercantile Exchange trading, settling at $57.17, while January-contract North Sea Brent crude gained 44 cents per barrel in London dealings, ending at $63.93.

Telecom names rebound

Over the past few sessions, wireline telecommunications names have been getting whacked around as that whole sector has been seeing a secular decline in its business as more customers “cut the cord” and abandon traditional phone service completely in favor of cellphones and the internet.

But on Thursday traders saw some of those names bouncing from their recent depths.

Little Rock, Ark.-based CenturyLink’s 7½% notes due 2024 gained 7/8 point to end at 98¼ bid, with over $39 million traded.

Sector peer Frontier Communications’ 11% notes due 2025 gained 3/16 point, ending just under 77½ bid, with over $29 million of volume.

A trader saw Stamford, Conn.-based Frontier’s 10½% notes due 2022 “really get smoked” and plunge some 9 points on the day, down to the 71 bid level.

But he dismissed that as a fluke, “a likely bad print,” noting that those bonds had been trading around 80 bid most of the day before that one late downside trade – and said that they were back up to near 80 at the end of the day, which he called about unchanged.

Another trader called the big plunge on no real news “crazy.”

But Broomfield, Colo.-fiber optic network operator Level 3 – now a unit of CenturyLink on a sale that closed Nov. 1 – was seen finishing on the downside for real on Thursday.

Its 5 3/8% notes due 2025 swooned by nearly 3 points to 98 3/8 bid, with over $13 million traded.

Its 5 5/8% notes due 2023 ended down 1¼ point at 100¾ bid.

Overall market weakness

A trader said that generally, “the market was significantly weaker today, something we haven’t really seen in a while.”

He said that “while we’ve seen tech names, or hospitals, or some other individual sector lower, this was more broad-based, with things down generically ¼ to ½ point.”

Other losers on the day included Canadian drugmaker Valeant Pharmaceuticals International, whose 6 1/8% notes due 2025 lost 3/8 point to end at 84 5/8 bid, with over $17 million having traded, while its 6 3/8% notes due 2020 did even worse, down ¾ point at 99 bid, on $14 million of volume.

Camp Hill, Pa.-based drugstore operator Rite Aid’s 6 1/8% notes due 2023 fell ½ point to close at 88½ bid, with over $24 million having changed hands.

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