CF Industries quiets after downturn; GenOn down on NRG earnings release; Windstream in merger talks

By Colin Hanner

Chicago, Nov. 4 – Trading in distressed debt-land on Friday was punctuated by $4.12 billion outflow in high-yield mutual and exchange-traded funds, as well as the steepening price of oil, earnings reports and company-specific news.

One of the notes feeling the effects of that this week was CF Industries Inc., which was “not nearly as active” compared to Thursday’s tumultuous trading, a trader said.

The nitrogen and fertilizer manufacturer and producer saw several single-digit decreases on Thursday, but sentiment changed on Friday.

One trader said the 4.95% notes due 2043 were up 1 point to 82 on “pretty good volume.”

The 3.45% notes due 2023 notes were up ¼ point to 90½, trading a “little better than yesterday,” a market source said, when the notes were trading in the sub-90 level. A trader said the notes were trading at 90½, but said the notes were up 3/8 point.

The $4.12 billion outflow of the high yield funds – the third-largest since tracking began in 1992 – was also the largest this year. The outflow is a general indicator of high-yield junk bond trends, and traders have named the outflow and sliding equity markets – stirred by consternation surrounding Election Day – as factors influencing moves, or lack thereof, in distressed debt-land.

“I think that overall landscape of outflows and sentiment about equities has been weighing on the [distressed debt] market,” a trader said. “Earnings and specific news, combined with general sentiment in the overall markets, has sort of been the setting the tone.”

NRG Energy Inc. was the latest to reflect quarterly earnings in its notes movement on Friday as the multi-faceted energy company beat forecasts, reporting a $1.27 profit per share.

The company reported revenue of $3.95 billion and said it raised its 2016 EBIDTA to between $3.25 billion and $3.35 billion, up from $3 billion to $3.2 billion.

Its stock rose 90 cents, or 8.88%, to $11.03.

Its notes, meanwhile, traded down, as seen in GenOn Energy notes, which merged with NRG Energy Inc. in 2011.

GenOn’s 9½% notes due 2018 were down 4¾ points to 73¾, a market source said.

Its 7 7/8% notes due 2017 were down 3½ to 74½ on “quite a bit of trades,” a trader said. Another trader said the same notes were the most active of the day.

Merger talks

Little Rock, Ark.-based telecommunications firm Windstream Holdings Inc. saw positive movement in its 6 3/8% notes due 2023, which were up 1½ points to 88½, one of the biggest rising movers of the day, according to a market source.

Its movement might be due to a report from Reuters that Windstream and fellow telecommunication firm Earthlink Holdings Corp. are in talks to merge in an all-stock deal that would make Windstream owner of more than half of the combined company.

Each company will report its third-quarter earnings on Monday.

In oil

Oil dipped below $45-per-barrel on Friday, capping off a week of continued losses. News reports by Reuters indicated that Organization of Petroleum Exporting Countries sources said that Saudi Arabia had threatened to raise its production, and thereby lower oil prices, because of clashes with Iran, though OPEC secretary-general Mohammed Barkindo refuted that.

The U.S. added nine oil rigs this week, the 20th time in 23 weeks that there was an increase, according to data from Baker Hughes.

West Texas Intermediate crude declined 72 cents, or 1.61%, to $43.94.

Brent crude decreased 88 cents, or 1.90%, to $45.47.

Oil and gas explorer and producer California Resources Corp. was an anomaly in oil-related bonds on Friday, as its 8% notes due 2020 were up ¼ point to 66. A trader said the same notes were up ¾ point to 67¾, and noted that the movement was “odd.”

Its stock was up 77 cents, or 7.83%, to $10.61.

The company announced its quarterly earnings on Thursday, though, and posted some positive news, including net income of $546 million, or $13.06 per diluted share, for the third quarter of 2016, compared with a net loss of $104 million, or $2.72 per diluted share, for the same period in 2015.

California Resources also saw a 14% reduction in production costs year-over-year and a $625 million net debt reduction from a cash tender offer.

Stone Energy Corp.’s 7½ % notes due 2022 were down 1 point to 57 ½, and Denbury Resources Corp. saw a ¼ point decline in its 6 3/8% notes due 2021, which settled at 79, according to a market source.

Round up

Intelsat SA’s Jackson-linked 7¼% notes due 2019 were down ½ point to 77¾, while its 7¾% notes due 2021 were up 1¼ points to a “34½-35” handle, according to a trader.

The Luxembourg-linked 6¾% notes due 2018 were down ¼ point to 67¾, a trader said.

Endo Pharmaceuticals Co.’s 6% notes due 2023 were down ½ to 81½ on a “half-dozen trades,” a trader said.

Concordia International Corp.’s 9½% notes due 2022 were down 3¾ to 56½.

The downturn in pharmaceutical companies may be a result of an investigation into price collusion of several pharmaceutical companies, which has leaked over into diminishing equity and bond prices, including Endo and Concordia.

© 2015 Prospect News.
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