ATP Oil & Gas bonds lose big as new CEO departs; Alpha Natural slips as production scaled back

By Stephanie N. Rotondo

Phoenix, June 8 - Though the distressed debt market was generally firmer Friday, the nom du jour - ATP Oil & Gas Corp. - was decidedly not.

The oil exploration company's debt dropped as much as 14 points on the day on news a newly hired chief executive officer had resigned. The official word was that the parties decided to part ways because they could not come to a "mutually agreeable employment agreement," as ATP said in a statement released late Thursday.

The market, however, wasn't buying that story. The bonds did eventually recover a few points, but still ended the day down at least 10 points.

Alpha Natural Resources Inc. paper was also declining during the last trading session of the week. The company announced multiple mill shutdowns on Friday, citing a lack of demand for its product.

On the upside, Exide Technologies Inc. continued to rise after the battery maker's quarterly report was published late Thursday. Traders called the bonds 1 to 2 points better.

ATP the big loser

Late Thursday, Houston-based ATP Oil & Gas announced that its new CEO Matt McCarroll - hired June 1 - was leaving his new post due to an inability to come to terms on an employment contract.

"Why would they announce that they had hired a new CEO without inking a contract?" a trader asked.

Investors also seemed to be asking that question, given that the bonds dropped as much as 14 points on the day.

The trader said the 11 7/8% notes due 2015 hit a low of 43 before recovering some to end at 46 bid, 47 offered.

That was still down 10 points from the previous session, he said.

Another trader said the debt had lost as much as 12 to 14 points at its lows around 42 bid, 44 offered. Paper moved back up to 47 bid, 48 offered, he said, still down from 57 bid, 58 offered.

"That's pretty shaky," another trader said of ATP's explanation for the CEO's short term. He speculated that McCarroll might have discovered an element of fraud at the company.

"I don't know what he found," another trader said. "You can speculate as to why he left. Maybe he found something he didn't like."

In addition to exiting his position, McCarroll also canceled share purchases of ATP stock.

The equity was similarly down on the day. The stock price (Nasdaq: ATPG) fell 53 cents, or 9.08%, to $5.31.

McCarrol had said in the June 1 press release announcing his hiring that he had purchased 1 million shares of the company's stock at market price, which showed his "commitment" to ATP.

Alpha Natural falls

Alpha Natural Resources' debt was also lower on the day, though "not getting slaughtered too bad," according to a trader.

He called the 6¼% notes due 2021 down a point or so" at 861/2.

Another trader called the issue a point weaker - also at 86½ - while the 6% notes due 2019 fell a deuce to 87.

A third market source pegged the 6¼% notes at 86¾ bid, down more than 2 points day over day.

On Friday, the Bristol, Va.-based coal mining company announced plans to cut back its operations in northern and southern Kentucky. The plans will result in discontinued operations at four mines and the idling of two coal-preparation plants.

Production will be slowed at other mines and four contract mines will be shuttered.

A total of 436 jobs will be affected, but 286 of those will be moved to other facilities. The remaining 150 employees will remain on the payroll for 60 days.

The production slowdown is the result of weakened coal demand, the company said. The upside is that the company had already accounted for the event when providing its guidance in its first-quarter earnings release on May 3.

"This year, utilities in the U.S. are expected to burn the least amount of steam coal than at any time in the last 20 years, and the pressure's been very intense on coal sourced from eastern Kentucky, particularly operations rendered uncompetitive due to fuel switching, relatively high rail rates and competition from Illinois Basin coal," said Kevin Crutchfield, Alpha's chairman and CEO.

Crutchfield also noted that the coal sector in general is facing a "new normal" and that Alpha Natural aims to position itself within those new constraints.

"Although we remain constructive regarding ANR's longer term prospects, we continue to believe the next few quarters will be difficult for ANR and the entire coal industry," Gimme Credit LLC analyst Evan Mann wrote in a comment published Friday afternoon.

Exide rises post-earnings

Exide Technologies' 8 5/8% notes due 2018 were better Friday, following the late Thursday release of the company's fiscal fourth quarter results.

A trader quoted the notes at 79 bid, 80 offered.

Another trader said there was "pretty heavy trading' in the name, also placing the debt around the 80 mark.

The numbers "were pretty good," he said. "Better than expected."

A third trader called the issue up 2½ points, also at 80.

For the fourth fiscal quarter of 2012, Exide reported improved net sales of $782.6 million, compared to $774.5 million the year before. Net loss therefore shrank to $2.7 million, or 3 cents per share, versus $13.7 million, or 18 cents per share, in fiscal 2011.

The company also managed to move from cash burn to cash flow, generating free cash flow of $55.7 million.

That compared to a burn of $14.7 million in the previous year.

The improved results benefited from lower restructuring and impairment charges, the Milton, Ga.-based company said in a press release.

For fiscal 2012 as a whole, net sales gained 7% to $3.1 billion. Net income was $56.7 million, of 69 cents per share, compared to $26.4 million, or 33 cents per share, in fiscal 2011.

As of March 31, Exide had cash and equivalents of $155.4 million, as well as $152.8 million available under its revolving credit facility. Cash was down from 4161.4 million, but the available credit facility balance was up from $144 million.

Dynegy, Edison power up

Declining prices for commodities such as oil, coal and natural gas were given credit for gains in Dynegy Holdings LLC and Edison International Inc.

A trader said Dynegy's 8 3/8% notes due 2016 were stronger, trading at 62½ bid, 63½ offered.

Another market source deemed the 7¾% notes due 2019 up a point at 62½ bid.

Meanwhile, a trader said Edison International paper was "better" across the board.

He saw the 7¾% notes due 2016 up 2 points at 541/2, while the 7½% notes due 2017 were up "almost 2 [points]" at 591/2.

And, the 7.2% notes due 2019 put on a point, closing around 53 and the 7% notes due 2017 earned 1½ points, finishing around 543/4.

There was no fresh news out on Dynegy. Edison, however, announced that its San Onofre nuclear facility was going to remain closed at least through August.

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