FirstEnergy Solutions notes gain on earnings call; Noble active as company ups dividend

By James McCandless

San Antonio, April 24 – Trading in the distressed debt market was muted, traders reported, though activity is expected to rise as the week continues as earnings reports are released.

FirstEnergy Solutions’ notes gained again as its parent company held an earnings call in which it signaled that it would continue to lobby for federal aid for at-risk plants.

Noble Energy Inc.’s notes were mixed after the company announced a 10% increase of its quarterly dividend rate.

Sears Holdings Corp.’s paper was up after CEO Eddie Lampert announced Monday that he would make an offer to purchase certain assets that have been listed for sale for two years.

American Tire Distributors’ 10¼% senior notes due 2022 were the major losers of Tuesday’s session with the notes dropping almost 50% after Goodyear Tire & Rubber Co. announced it would no longer distribute its tires through the company.

Intelsat SA’s notes were mixed. Recently a subsidiary was chosen to take part in a government project. Frontier Communications Corp.’s issues were mixed as it continues the search for buyers for certain assets. Mallinckrodt plc traded up in the medical space.

FirstEnergy earnings eyed

FirstEnergy Solutions, a subsidiary of Akron, Ohio-based electricity producer FirstEnergy Corp., saw its notes edge upward on Tuesday, according to a market source. The parent company held an earnings call on Tuesday to praise an agreement in principle with two groups of key creditors and to signal that it would continue to advocate for federal assistance for at-risk plants, though the measure remains in doubt.

President and CEO Charles Jones said that the potential aid was necessary to protect the nation’s energy infrastructure.

“We understand the importance of these plants to the regional economy and recognize that more than 5 million of our utility customers are still exposed to the uncertainty of competitive markets,” Jones said.

The 6.05% notes due 2021 gained about ¼ point to close at 44¾ bid. The 6.8% bonds due 2039 rose about ½ point to close at 44¾ bid. The 6.85% bonds due 2034 edged up ¼ point to close at 45 bid.

On Monday, the 6.05% notes about 12¾ points, the 6.8% bonds rose about 10½ points, and the 6.85% bonds gained about 16½ points.

Noble Energy raises dividend

Houston-based independent oil and gas producer Noble Energy’s note issues were mixed after reports confirmed that the company had elected to raise its quarterly dividend rate by 10%. The new quarterly dividend will be 11 cents starting on May 21.

“There are some questions as to whether they can keep that up for the long-term,” a trader said.

The company recently sold off its Gulf of Mexico assets for $710 million.

The 6.2% bonds due 2040 rose about 1¼ points to close at around 69¼ bid. The 5¼% bonds due 2042 lost ½ point to close at 66¼ bid.

Sears trades up

Hoffman Estates, Ill.-based retailer Sears’ paper traded higher on Tuesday, a market source confirmed, after Monday’s announcement from CEO Lampert that he has made an offer to purchase the Kenmore brand from the company on behalf of his investment firm and majority owner of Sears, ESL Investments.

The company had listed the brand for sale two years ago.

The 6 5/8% paper due 2018 gained about 3¾ points to close at around 86 bid.

The 6 5/8% paper lost about 1¾ points and the 8% notes gained 13 points on Monday.

American Tire tanks

American Tire’s 10¼% senior notes due 2022 experienced the day’s most dramatic drop. The 10¼% notes were at 97½ last week, a market source said.

They opened Tuesday at 80 and steadily traded down to 49¾ as the day progressed in high volume trading, a market source said.

The Huntersville, N.C.-based tire distributor announced late last week that its relationship with Goodyear was ending.

Goodyear ended its distribution agreement with American Tire after entering into a joint distribution venture with Bridgestone.

Without Goodyear, investors appeared to have lost confidence in American Tire, sources said.

Volume names trade

Luxembourg-based satellite communications company Intelsat’s notes were mixed. Recently, a subsidiary was placed on a satellite payload project for the Federal Aviation Administration.

The Intelsat Jackson SA 5½% notes due 2023 shaved off about ¼ point to close at 84 bid. The 7¼% notes due 2020 gained about ¼ point to close at around 97¼ bid.

Norwalk, Conn.-based wireline telecom name Frontier Communications’ note issues were mixed as the search for buyers for certain assets continues.

The 7 5/8% notes due 2024 gained about ¾ point to close at 65¼ bid. The 10½% notes due 2022 received downward pressure but remained level at about 87¼ bid. The 11% notes due 2025 gained about ¼ point to close at around 77¼ bid.

Britain-based drugmaker Mallinckrodt saw its 4¾% paper due 2023 traded up 1¼ points to close at 71¼ bid.

“There was a bit of a lull in activity today,” a trader said. “That will probably change as more earnings come out.”

-Abigail W. Adams contributed to this report

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