Cliffs Natural Resources, Walter Energy, Arch Coal have earnings on tap, end mostly lower

By Stephanie N. Rotondo

Phoenix, Oct. 24 – As the week came to an end, distressed debt investors were already looking to the coming week and the earnings releases it will bring.

Walter Energy Inc., Cliffs Natural Resources Inc. and Arch Coal Inc. are all slated to put out their third-quarter results next week, and the expectations for all of them are not good.

As such, the companies’ bonds were mostly moving toward the down side in Friday trading.

However, Affinion Group Inc. is also expected to release numbers next week – Thursday, to be exact – and those bonds were faring better on the day, according to a trader.

The trader said the 7 7/8% notes due 2018 opened “plus/minus 78” and moved up “a couple points” to close around 80.

Meanwhile, the oil space, and anything related to it, was still weak.

A trader said Hercules Offshore Inc.’s 10¼% notes due 2019 fell a point to 78, while Samson Investment Co.’s 9¾% notes due 2020 broke through 80 to end around 79 7/8.

Cliffs steady

Cliffs Natural Resources is set to bring earnings out on Monday, with analysts estimating the company will post a 7-cent-per-share loss for the third quarter.

In the previous year, the company reported a 64-cent profit for the third quarter.

Revenue expectations are also weak, as analysts are predicting a 17% decline year over year. For each quarter of the previous year, the iron ore mining company has seen revenue drop an average of 12% per quarter.

Investors will not only be looking at the hard numbers but will also be interested to hear the company’s take on declining iron ore prices.

But Cliffs’ debt managed to maintain ground in Friday trading, stemming a string of losses for the week.

A trader said the 4 7/8% notes due 2021 held steady at 71 and the 4.8% notes due 2020 were unchanged at 72.

Another trader deemed the 4 7/8% notes and the 5.8% notes due 2018 “basically unchanged” in the low 70s and low 80s, respectively.

Arch Coal drifts

Arch Coal will follow Cliffs’ earnings announcement with its own release on Tuesday. Like Cliffs, the numbers are not expected to be great.

Analysts are forecasting a loss of 41 cents per share, which would compare with a 1-cent loss the year before. Revenue is expected to decline 9%.

Also like Cliffs, the coal producer has seen its revenue decline in every quarter for at least the last four quarters.

Leading up to the financial results, a trader said Arch’s 7¼% notes due 2021 fell a point to 40. The 7¼% notes due 2020 slipped slightly to 52.

Walter weaker

Walter Energy’s 8½% notes due 2021 were softening on the day as well as investors looked to that company’s earnings release on Thursday.

A trader pegged the issue at 27½, down half a point. The 9 7/8% notes due 2020 were also called half a point lower at 29.

“The unsecured [notes] were drifting a little bit lower,” another trader said, seeing that class of paper fall to 25½. He noted that the unsecured notes were trading more than the other bonds in the structure but added that “everything was quoted a little bit lower.”

For the third quarter, the metallurgical coal producer is expected to report a loss of $1.63 per share. The numbers are expected to be weighed on by the depressed met coal market, which has dropped to $119 per ton for the fourth quarter from $120 per ton for the third quarter.

© 2015 Prospect News.
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