Alpha Natural earnings beat expectations, but bonds weaken; MolyCorp boosted by new financing

By Stephanie N. Rotondo

Phoenix, Aug. 6 – Distressed bonds were mixed Wednesday, as investors focused on news away from the space.

Geopolitical concerns were increasing yet again as NATO deemed an incursion by Russia into the Ukraine as likely. Investors were also keeping an eye on earnings and the breakdown of a merger between Sprint Nextel Inc. and T-Mobile.

Of the day’s distressed dealings, Alpha Natural Resources Inc. paper was weaker on the day, even as the company reported earnings that beat estimates.

Still, the numbers showed a wider loss than the previous year.

In the broader mining sector, MolyCorp Inc.’s debt got a boost after the company announced a commitment for $400 million of secured financing.

But it was the retail arena that was really showing the day’s mixed trend.

A trader said Gymboree Corp.’s 9 1/8% notes due 2018 held steady at 61½. But Claire’s Stores Inc.’s bonds were mostly lower, the 9% notes due 2019 at 101 1/8, the 7¾% notes due 2020 at 68½ and the 8 7/8% notes due 2019 at 81.

The debt was down anywhere from a quarter-point to a half-point, depending on the issue.

For its part, Toys “R” Us Inc.’s 7 3/8% notes due 2018 finished 1½ points higher at 77½, though its 10 3/8% notes due 2017 slipped nearly a point to 83½.

Alpha Natural beats estimates

A trader deemed Alpha Natural Resources’ debt weaker on the day, even as the company reported better-than-expected earnings.

“They had good results, for coal,” he said.

The 6¼% notes due 2021 ended softer at 64¼, after being up earlier in the day, the trader said. The 6% notes due 2019 dipped a quarter-point to 67¼.

However, another trader said the name was “relatively unchanged, for the most part.”

For the second quarter, Bristol, Va.-based Alpha Natural reported a net loss of $512.6 million, or $2.32 per share. That was nearly three times the loss seen in the year ago period.

The company attributed the wider loss to a non-cash goodwill impairment charge of about $309 million.

On an adjusted basis, the loss was 56 cents per share, much better than the 74 cents per share analysts polled by Thomson Reuters were expecting.

Metallurgical coal shipments fell to 4.5 million tons from 5.6 million tons the year prior.

Total revenue dropped 21% to $1.1 billion.

MolyCorp pops

MolyCorp’s 10% notes due 2020 were lower in early trading, according to a trader, but popped “a good bit” once the company announced it had secured $400 million in new financing.

The bonds were offered as low as 87½, the trader said. Then the Greenwood Village, Colo.-based mining company said that it had inked a $400 million financing agreement with funds managed by Oaktree Capital Management LP and the debt shot up to 90¼, he said.

Under the terms of the dal, Oaktree will provide MolyCorp up to $400 million via credit facilities and the sale and leaseback of certain equipment located at the company’s Mountain Pass facility. A total of $250 million will be available as soon as the deal closes, while the remaining $150 million will be available until April 30, 2016, assuming MolyCorp meets certain financial and operational conditions.

Additionally, MolyCorp issued warrants equal to 10% of the company’s outstanding stock to the lenders.

The company did not disclose what it plans to do with the new funds.

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