Arch Coal beats estimates, bonds firm; McClatchy up on one-time gain; ATP end in sight: trader

By Stephanie N. Rotondo

Phoenix, July 27 - It was muted in terms of volume in the distressed debt space Friday, a trader said.

Still, "a lot of stuff was up today."

Arch Coal Inc., for example, was higher despite posting a loss for the second quarter. However, the numbers beat expectations.

McClatchy Co. paper was also up on earnings, following a surprise profit.

Meanwhile, ATP Oil & Gas Corp. bondholders are reportedly seeking advisors to help them out in the event of a restructuring. One trader said he thought it was inevitable that a restructuring - "most likely a bankruptcy" - would occur, given the company's "marginal" earnings.

The bonds were little moved during Friday trading, however.

Arch Coal beats estimates

A trader said Arch Coal's 7¼% notes due 2021 were active and higher following the company's earnings release.

He called the issue up 2½ points at 823/4, on about $14 million traded.

Another trader said the debt was "pretty active," and up "about 2 points" around 82.

The St. Louis-based coal producer reported a second-quarter loss of $435.5 million, or $2.05 per share. For the same quarter of 2011, profit was $6.3 million, or 4 cents per share.

The loss was pushed down by one-time charges associated with mine closures.

Excluding those costs, net loss would have been 10 cents per share, versus analyst expectations of 18 cents per share.

Revenues meantime increased 8% to $1.1 billion. That was also ahead of expectations of $998 million.

The revenue gain came despite a 14% decline in sales volume.

Total production fell to 31.5 million tons during the quarter, versus 35.5 million tons in the first quarter and 36.7 million the year before.

McClatchy debt gains

McClatchy, the Sacramento-based newspaper publisher, also reported better-than-expected earnings, which helped the bonds climb.

One trader called the 11½% notes due 2017 up over 2 points at 1061/4. He also pegged the 5¾% notes due 2017 at 821/4, up just over a deuce.

Another trader said the 11½% notes were "better," up 1½ points at 106.

One-time gains helped the company's bottom line improve for the quarter, despite a decline in revenues from circulation and advertising.

Furthermore, the company declined to give a forecast of advertising revenue "due to a very choppy economic recovery that is affecting our advertising customers."

McClatchy posted a profit of $26.9 million, or 31 cents per share, compared to a profit of $4.95 million, or 6 cents per share, the previous year.

The gain was due to one-time gains, including a $1.7 million gain on debt.

Revenues were down 4.8% to $299.3 million.

Seeking a bottom for ATP

Holders of ATP Oil & Gas bonds are reportedly seeking advisors to help out on a possible restructuring, Bloomberg reported Thursday.

Come Friday, the bonds were little moved, traders said.

One trader called the Houston-based oil exploration company's 11 7/8% notes due 2015 were up nearly half a point at 39, while another said the paper was "not all that different," trading with a 38 handle.

A third trader quoted the issue at 38 bid, 39 offered.

The article reported that investors had been interviewing potential advisors during the last week, though the source declined to be named due to the private nature of the matter.

One trader noted that a bankruptcy could be looming, especially given that the bonds were in a 53-54 context just a week ago.

"That certainly tells you everything you need to know," he said.

"They have been right on the crux of having expenses far greater than revenues," he explained. "It was never clear that it was going to be sustainable. The numbers have always been just too marginal.

"There is some value, but there's not enough value for $1.5 billion in debt," he added.

The trader further opined that it the company was looking to refinance its debt, it would have to "give away the shop" even with the favorable conditions of the current market.

Though he considers a bankruptcy likely, he also said that it might not be a "typical" case. Instead, he opined that a hedge fund might be willing to come in for a large portion of the equity.

Still, he remarked that at current levels, there was still more room for the bonds to drop.

"At 20 cents on the dollar, it's worth a look," he said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.