Walter Energy gives back gains post-numbers; Fannie Mae reports profit, preferreds edge higher

By Stephanie N. Rotondo

Phoenix, Feb. 21 - Walter Energy Inc. was a notable distressed name on Friday, just one day after the company reported earnings.

A trader said the coal producer's debt had run up after the numbers came out, but come Friday the bonds were "giving back those gains."

Walter reported a narrower loss for the full year, but a wider loss for the fourth quarter.

In other earnings news, Fannie Mae posted its eighth consecutive quarterly profit and said that it planned to pay the government a $7.2 billion dividend.

Once the dividend payment is made, Fannie will have paid back in full the amounts taken from taxpayers in the 2008 bailout.

Given the news, the agency's preferreds - as well as those of sector peer Freddie Mac - pushed higher.

Elsewhere in distressed, a trader said Momentive Performance Materials Inc.'s bonds "quieted down a fair amount" after trading actively - and weaker - for the last week.

He pegged the 9% notes due 2021 at 89, which he said was a little stronger on the day.

Edison Mission Energy paper meantime continued to edge upward, climbing half a point to 861/2, the trader said.

Walter erases gains

Walter Energy bonds gave back some of the gains earned on Thursday after the company reported earnings.

A trader saw the 9 7/8% notes due 2020 around 751/2, which compared to levels around 79 in the previous session.

"I guess people are just reevaluating it," he said.

Another market source placed the 9 7/8% notes in a 75½ to 76 context, while the 8½% notes due 2021 slipped to around 73 from 74¼ bid, 75 offered.

On Thursday, the Birmingham, Ala.-based coal producer reported a fourth-quarter net loss of $174.3 million, or $2.79 per share. For the same quarter of 2012, net loss was $71 million, or $1.13 per share.

The quarterly results of 2013 included a $140.2 million charge for deferred tax assets.

Revenues were $472 million, down from $478.8 million for the same quarter of 2012. The company said it saw a 13.8% increase in metallurgical coal sales volume, as well as a decline of $14.26 per ton in terms of price.

For the full year, Walter lost $359 million, or $5.74 per share, versus a loss of $1.1 billion, or $16.96 per share, the year before.

Interest expense increased to $64.6 million from $49.6 million, driven by an increase in long-term debt and higher interest rates.

As of Dec. 31, liquidity was $587.3 million, consisting of cash and equivalents of $260.8 million and $326.5 million available under a revolving credit facility.

Fannie rises on earnings

Fannie Mae put out earnings on Friday, showing net income of $6.5 billion for the fourth quarter.

In response, the agency's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) moved up 17 cents, or 1.66%, to $10.40. Sector peer Freddie saw its 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) rise a dime to $10.60.

For the year of 2013, Fannie's net income was $84 billion.

Because of a revised agreement related to its 2008 bailout, Fannie is required to pay out a portion of its profit to the federal government. As such, the mortgage giant plans to make a $7.2 billion dividend payment.

In doing so, Fannie will have finally repaid taxpayers the $116.1 billion it took in bailout funding.

For its part, Freddie took $71.3 billion in bailout dollars.

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