TXU bonds get boost as tax issue explained; Fannie, Freddie preferreds rise on latter's profit

By Stephanie N. Rotondo

Phoenix, Nov. 6 - The distressed debt market was firm on Election Day, but new issues continued to keep investors otherwise occupied.

Energy Future Holdings Corp.'s debt got a big pop as the company clarified its previously reported tax liability issue. When the utility had first noted the problem in October, its bonds took a massive dive.

Elsewhere in the secondary, a trader remarked that Fannie Mae and Freddie Mac preferreds were "up marginally" following the release of third-quarter results from Freddie.

The government-backed mortgage provider posted a profit of $2.9 billion.

TXU rises as issues explained

Energy Future Holdings - or TXU, as it is more commonly referred to - got a boost after the company released new details on a tax liability issue that it noted in its recent quarterly update.

"All those bonds were flying today," a trader said, though he pointed out that volume in the name was low. He called the structure up 3 to 10 points overall, seeing the 11¼% notes due 2017 rising over 9 points to 85.

The 10 7/8% notes due 2017 were meantime up almost 7 points to 843/4, while the 5.55% notes due 2014 gained 5 points, ending at 60.

Another trader said the 6½% notes due 2024 were "better," trading at levels around 44, versus previous levels in the low-40s. He called the 10% notes due 2020 "up almost 2 points" at 1071/2.

In an 8-K filed with the Securities and Exchange Commission on Tuesday, the Dallas-based utility provider explained that a $19 billion excess loss account and a $4 billion deferred intercompany gain disclosed in its recent 10-K "were created in connection with financing transactions and internal restructurings that involved Texas Competitive Electric Holdings and its assets but not Energy Future Intermediate Holding or Oncor Holdings."

Profit boosts Freddie, Fannie

A trader said Fannie Mae and Freddie Mac paper was gaining ground after the latter reported a $2.9 billion profit for the third quarter.

The 8.375% fixed-to-floating rate noncumulative perpetual preferreds linked to Freddie (OTCBB: FMCKJ) put on 8 cents, or 4.57%, to close at $1.83. The 8.25% fixed-to-floating rate series S noncumulative preferreds issued by Fannie (OTCBB: FNMAS) rose 3 cents, or 1.71%, to $1.78.

Freddie's quarterly profit compared to a $4.4 billion loss for the same quarter in the previous year.

The firm also said that it had paid a $1.8 billion dividend to the U.S. Department of treasury and that it had not asked for further government aid.

That marks the sixth quarter since September 2008 in which Freddie has not sought more government assistance.

A firmer market

Also in the high-yield space, a trader said Petroleos de Venezuela SA's 8½% notes due 2017 fell a point to close at 90, while the 9¾% notes due 2035 earned point, closing at 853/4.

The trader also said that Supervalu Inc.'s 8% notes due 2016 remained active, but that the bonds were holding steady at 961/2.

Another trader pegged the notes at 96½ bid, 97 offered.

© 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.