TXU gets OK for Oncor auction, bonds little moved; Sprint earnings miss; American Realty falls

By Stephanie N. Rotondo

Phoenix, Nov. 3 – The first trading day of the month was a quiet one for the distressed debt market, according to traders.

“I don’t even think there was that much going on in the primary [high yield market],” one trader said. “I think everybody’s dealing with month-end stuff.”

The trader said that Tuesday’s election “could be an excuse” for investors to sit on the sidelines, “but I don’t think it’s such a hot topic of conversation that people aren’t paying attention to the markets because of it.”

Energy Future Holdings Corp.’s bankruptcy case inched forward Monday, as the judge overseeing the case gave the parent company conditional approval to sell its Oncor Electric Delivery Co. LLC unit.

However, even those bonds were little moved on the news.

Meanwhile, Sprint Nextel Corp. put out its third quarter earnings after the market closed. A trader said he hadn’t seen any post-numbers trading, but opined that there could be some action come Tuesday.

For the quarter, the Overland Park, Kan.-based telecommunications company posted a loss of 19 cents per share. That compared to expectations of a 4-cent-per-share loss from analysts polled by FactSet.

Revenue was almost $8.5 million and operating revenue was $192 million.

Net post-paid subscriber loss was 272,000.

The company also said that it was planning to cut 2,000 jobs.

TXU gets OK for auction

Energy Future Holdings – the energy company formerly known as TXU – got the conditional OK to put its Oncor Electric unit up for auction on Monday, allowing the company to move its bankruptcy case forward.

However, the conditions upon which the sale was approved could extend the company’s stay under Chapter 11 protections.

On the news, the company’s debt was little moved.

The 5.3% notes due 2042 linked to Oncor were unchanged to down a touch, trading with a 119 handle. The 10¼% notes due 2015 linked to Texas Competitive Electric Holdings Co. LLC moved up to 10¾ from 10 3/8.

Under the terms of the approval, Energy Future Holdings has to alter the approval process for its directors of its affiliates. The bidding process must include two creditors committees and the timeline should be extended in order to allow for the development of alternative deals.

The regulated Oncor unit is believed to be worth billions of dollars. Some potential bids have been valued as high as $17.5 billion.

More trouble for American Realty

Despite the generally positive tone of the market, American Realty Capital Properties Inc.’s 6.7% series F cumulative redeemable preferred stock (Nasdaq: ARCPP) continued to weaken as more bad news rolled out.

The preferreds fell $1.11, or 5.04%, to $7.85. The common stock (Nasdaq: ARCP) then fell $1.02, or 11.5%, to $7.85.

In the company’s bond debt, a trader said the 3% notes due 2019 dropped 3 points to a 93 to 94 context.

In a regulatory filing on Wednesday, American Realty said that its financial statements dating back to 2013 could not be relied upon due to intentional errors and other errors that were intentionally left incorrect.

On the heels of that news, the company also disclosed that chief financial officer Brian Block and chief accounting officer Lisa McAlister had resigned from their posts.

Come Monday, it was reported that the Federal Bureau of Investigation was launching its own criminal probe regarding the accounting issues.

Also on Monday, RCS Capital Corp. said it was calling off its $700 million buyout of American Realty’s Cole Capital Partners. In a statement released early Monday, American Realty said it had received word of the deal’s cancellation “in the middle of the night.

“As we informed RCS orally and in writing over the weekend, RCS has no right and there is absolutely no basis for RCS to terminate the agreement,” the company said. “Therefore, RCS’s attempt to terminate the agreement constitutes a breach of the agreement. In addition, we believe that RCS's unilateral public announcement is a violation of its agreement with ARCP.”

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