Coal names get boost on hopes for more China demand; Supervalu bonds rebound ahead of numbers

By Stephanie N. Rotondo

Phoenix, Oct. 16 - It was another positive day for distressed bonds on Tuesday, though a trader noted that Sprint Nextel Corp. continued to be active.

Of distressed credits, the coal arena was pushing higher on renewed hopes that Chinese demand for product will help the struggling sector. While not everyone was optimistic about that, names like Alpha Natural Resources Inc. and James River Coal Corp. gained ground.

Meanwhile, Supervalu Inc. paper was rebounding a touch, just a couple days ahead of its earnings release. The grocery store operator's debt has been on a slow and steady decline of late, as the company's attempts to sell itself have proven unfruitful.

Coal names inch upward

Increased hopes that China would boost its demand for coal and related products pushed up the entire sector in Tuesday trading.

A trader said Alpha Natural's 9¾% notes due 2018 - an issue that priced Sept. 28 - were busy, though flat, at 993/4. He also saw James River Coal's 7 7/8% notes due 2019 trade as high as 61½ before settling back in around 60. That was still up from previous level in a 581/2-59 context, he said.

Another trader said Alpha Natural's 6% notes due 2019 were "definitely up" at 861/2, which he said was half a point to a point higher on the day.

He also pegged James River's bonds around 61.

A third market source called Alpha Natural's 6¼% notes due 2021 at 86½ bid, up nearly a point.

It was recently reported that steel demand was on its way up. That has given investors hope that demand for metallurgical coal will also gain, as it is used to make steel.

Additionally, China has recently seen an increase in rebar prices, which is also driving hopes of a demand boost from the nation.

Coal has also been benefitting from a gain in natural gas prices, as some have pondered that utilities will go back to using the cheaper fuel if gas prices get too high.

Supervalu rebounds pre-earnings

Supervalu is poised to release earnings later this week and a trader was seeing a small rebound in the company's debt during Tuesday trading.

He called the 8% notes due 2016 up almost half a point at 84 1/8.

Another trader, however, said the paper was "pretty much unchanged," also around the 84 mark.

Analysts are predicting a 13-cent per share profit from the Minneapolis-based company when its reports its third quarter results on Thursday. If those predictions prove accurate, it would be an over 50% decline from the previous year.

Also, just three months ago, the forecast from analysts was 21 cents per share.

Analysts are also expecting a nearly 5% decline in revenues.

Supervalu, which operates such chains as Albertson's, has been struggling to keep up with rivals like Walmart as consumers search for better values. As such, the company has been exploring options, including a possible sale. However, word has it that potential buyers are only interested in pieces of the company, not the whole, which management is striving to sell all together.

Nokia Corp. will also report earnings on Thursday. The numbers are not expected to be outstanding and many market watchers have said that sales of the company's new Lumia phones will have to be stellar in order to compete with Apple Inc.'s iPhone this holiday season.

Still, a trader said there was not much going on in Nokia debt ahead of the numbers, seeing the 5 3/8% notes due 2019 trading around 82.

Broad market feels firm

Elsewhere in the distressed market, a trader said Petroleos de Venezuela SA's bonds were "taking their usual place atop the high-yield bard."

Almost $50 million of the 8½% notes due 2017 changed hands, falling slightly to 901/2. The 9% notes due 2021 were also just a touch weaker at 851/2, on about $35 million traded.

Another $30 million of the 9¾% notes due 2035 traded, but moved up a deuce to 84 3/8.

At another desk, a trader said that while Edison International Inc.'s bonds were "not much different," he noted that there was "still some activity there."

He placed the bonds, which tend to trade on top of one another, at 481/2.

The trader also saw Clear Channel Communications Inc.'s notes continuing to gain, pegging the 10¾% notes due 2016 around 80 and the 11% notes due 2016 in a 791/2-80 context.

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