Post-election issues weigh on distressed bonds; James River results disappoint, coal pressured

By Stephanie N. Rotondo

Phoenix, Nov. 7 - The distressed debt arena was "heavier" post-Election Day, a trader reported, though it was "nothing bone crushing."

The coal arena, however, got trampled, due in part to the belief that the reelection of Barack Obama would be bad for the industry and in part to dismal earnings from James River Coal Co.

Coal gets clobbered

James River Coal posted a loss for its most recent quarter that was larger than had been expected.

That news, combined with the reelection of Obama, did little to boost the sector as a whole.

A trader saw James River's 7 7/8% notes due 2019 falling 4 points to 623/4. Another trader said the issue had fallen 6 points to 631/4.

In other coal names, Arch Coal Inc.'s 7¼% notes due 2020 dropped a deuce to 90, while the 7¼% notes due 2021 declined almost that much to 89.

And, Alpha Natural Resources Inc.'s 9¾% notes due 2018 closed at 1033/4.

For the third quarter, James River reported a net loss of $20.6 million, or 59 cents per share. That compared to a loss of $3.7 million, or 11 cents per share, the year before.

Revenues declined 5% to $288.1 million.

The coal producer also said that it had repurchased $61.4 million in debt at a discounted price of $23.9 million, or 39 cents on the dollar. Some in the market saw that as a positive for the company's bottom line, while others lamented the resulting decline in liquidity.

Liquidity was $172 million at the end of the quarter, versus $191.9 million the previous quarter.

James River's management also remarked that a potential for increased environmental regulations under Obama could negatively impact its balance sheet.

Still, the bigger issue at hand could be the price of natural gas.

Supervalu mixed

Supervalu Inc.'s bonds were mixed at the end of Wednesday trading, according to market sources.

One source said the 7.45% notes due 2029 were up over 2 points at 621/4.

However, another source said the 8% notes due 2016 were off nearly a point at 96 bid.

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