Distressed trading still muted, but firm; Tronox rises; Intelsat paper mixed; Fannie, Freddie decline

By Stephanie N. Rotondo

Seattle, Aug. 29 – Distressed debt trading was thin for the first trading session in the last week of August, though the market did end with a firm tone.

Tronox Ltd., for instance, was up almost a point, according to a trader. The trader saw the 6 3/8% notes due 2020 closing at 90¾.

Another trader deemed the dent up half a point to a point, trading “just north of 90.”

The first trader noted that the Stamford, Conn.-based chemical producer had raised prices last week on titanium dioxide, which is used in a variety of products from paint to sunscreen.

Intelsat SA meantime continued to be active, but mixed, as the company said that talks with holders of the 6¾% notes due 2018 regarding a debt swap had broken down.

A trader saw the 7¼% notes due 2020 rising almost half a point to 77½, though the 7¼% notes due 2019 came in a quarter-point to 79¾.

Another trader noted that the 6¾% luxco bonds were weaker, losing 5 points to end at 62½. He added that the 7¾% notes due 2021 slipped a point to 29.

In the energy arena, Peabody Energy Corp. bonds continued to climb higher, according to market sources.

One source said the 10% notes due 2022 jumped 3½ points to close at 30. Another trader echoed that level, adding that the unsecured notes – such as the 6½% notes due 2020 – pushed up to a 21 handle.

Ackman has hope for GSEs

Bill Ackman made some optimistic comments about the future of Fannie Mae and Freddie Mac in his mid-2016 letter to Pershing Square shareholders.

The market, however, appeared nonplussed, as the GSEs’ preferreds weakened in Monday trading.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dipped 3 cents to $3.99, while Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) slid a penny to $4.09.

In the letter, Ackman noted that the mortgage guarantors have been profitable, but that because of the government’s “net worth sweep” – enacted in 2012 – the agencies have been unable to build any capital cushion, thereby making another draw from the Treasury more likely.

“As the risk of capital draws from the Treasury increases, we believe that Congress will become increasingly focused on seeking a permanent resolution for Fannie and Freddie,” Ackman wrote.

The letter also noted the various legal battles being waged in regards to the sweep and how as more government documents are released, the more it appears that the current party line – that Fannie and Freddie were in a “death spiral” – was all smoke and mirrors.

Ultimately, Ackman thinks that a solution to the current predicament will be reached.

“We believe a new administration, which did not implement the Net Worth Sweep, will be more conducive to implementing a sensible resolution for Fannie and Freddie which benefits all stakeholders including tax payers, home owners and shareholders,” the letter said.

© 2015 Prospect News.
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