AMD bonds drop on CEO change; coal, energy paper get ‘bombarded’; Fannie, Freddie bounce back

By Stephanie N. Rotondo

Phoenix, Oct. 9 – The distressed debt arena was pressured again on Thursday, following an equity market reversal due in large part to concerns about a slowing global economy.

“The market got clobbered today,” a trader said.

The reversal was blamed on concerns about the global economy, especially as Germany – Europe’s largest economy – reported a 5.8% decline in exports in August, the biggest drop since January 2009.

Advanced Micro Devices Inc. didn’t need the day’s negative tone to decline, however. The company’s debt dropped Thursday following an announcement on Wednesday that the president and chief executive officer was stepping down.

With the company slated to put out earnings soon, the move has some wondering if it means that a turnaround effort is not going as well as hoped.

But the weak marketplace did little to help the already trampled coal, energy and mining sectors as well.

“Coal, energy and anything oil and gas related is just getting bombarded,” a trader said.

AMD slips on CEO change

A trader said Advanced Micro Devices’ debt was down 4 to 5 points after the chipmaker said Wednesday that its president and chief executive officer was leaving the company.

The trader pegged the 7% notes due 2024 at 92 post-news.

Another market source saw the 7¼% notes due 2022 falling 4½ points to 97½.

At another desk, that same issue was quoted in a 97 3/8 to 98 context. The paper was trading at or near par at the market’s open, which was still down from 101½ on Wednesday.

As for the company’s stock (NYSE: AMD), it was down 33 cents, or 10.06%, to $2.95.

Rory Read is leaving the post he has held for the last three years as the company attempts to take market share from Intel.

Lisa Su, chief operating officer, will take over.

But analysts at Wedbush Securities were concerned about the transition, which came so close to the company’s next earnings release. The move could indicate that the turnaround is taking longer than anticipated.

Wedbush cut its rating on the equity to “neutral” from “outperform,” also lowering its price target to $3 from $6.

Additionally, Wedbush lowered its fourth-quarter guidance, while maintaining its third-quarter outlook.

Looking to the fourth quarter, Wedbush is now predicting earnings of 4 cents per share, down from its previous 8 cents per share. Revenue estimates were lowered to $1.44 billion from $1.9 billion, both falling below the consensus estimates of 5 cents earnings per share on $1.49 billion in revenue.

Coal, energy, mining weaken

The coal, energy and mining sectors were “getting bombarded,” a trader said.

Among the coals – which were “getting hammered,” according to a trader – Arch Coal Inc. “had a ton of trading” in the 7¼% notes due 2021, a trader said.

He saw at least $20 million of the bonds changing hands, with the paper rising half a point to 37½.

However, he said the 7% notes due 2019 dropped almost 6 points to 39, while the 9 7/8% notes due 2019 lost a full 6 points to close around 42½ – albeit on less volume than the 2021 maturity.

Peabody Energy Corp. meantime dropped a fair amount as well.

One trader said the 6% notes due 2018 lost 5 points to 93. The 6¼% notes due 2021 declined over 2½ points to 90 5/8 and the 6½% notes due 2020 fell 3 points to 91¼.

Another trader pegged the 2021 issue at 89½, “down a couple points.”

In Walter Energy Inc., a trader said the 11% PIK toggle notes due 2020 closed 2 points lower at 45½.

And, Alpha Natural Resources Inc.’s 6% notes due 2019 fell 4 points to 51 5/8.

In the mining space, Cliffs Natural Resources Inc. was “down a bunch more,” a trader said, seeing the 4 7/8% notes due 2021 trading around 64 and the 3.95% notes due 2018 in the low-70s.

Another trader placed the 4 7/8% notes at 64 3/8, down over 4½ points on the day. The 3.95% notes ended off 4 points at 73.

And the 6¼% notes due 2040 fell 3½ points to 60¼ on “tons of trades,” according to a trader.

Among energy names, Halcon Resources Corp.’s 9¾% notes due 2020 finished at 94, off 6 points from Wednesday levels.

Private energy exploration and development company Samson Investments Co.’s 9¾% notes due 2020 remained under pressure, falling 4¼ points to 83.

As for California Resources Corp.’s 6% notes due 2024 – a $2.25 billion issue that priced Sept. 11 – it was off a point at 101 5/8.

Fannie, Freddie bounce back

Activity in Fannie Mae and Freddie Mac preferreds seemed to be leveling out, even as the agencies’ paper was “bouncing back a little bit,” according to a trader.

However, the agencies’ paper was the most actively traded securities on the day, of paying and non-paying preferred shares.

The trader said the upward moves came on the heels of reports indicating that it doesn’t matter who wins the next presidential election – neither side wants the government to act as a mortgage insurer, meaning a wind-down of some sort is still likely in the cards.

However, it could take several more years to iron that out.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up a nickel, or 1.49%, at $3.40. Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 6 cents, or 1.70%, to $3.42.

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