Bombardier improves as it seeks government aid; Consol, Peabody remain weak post-earnings

By Stephanie N. Rotondo

Seattle, Oct. 28 – Bombardier Inc. bonds were taking focus in the distressed debt market on Wednesday, as it was reported that the company was seeking government support.

Several news outlets reported that the aircraft manufacturer had approached the Ottawa government for short-term financial assistance while the company tries to get its CSeries aircraft into service.

The manufacturing and development of the plane has been beset by delays, though it is now expected to hit runways in the first half of 2016.

Meanwhile, coal names Consol Energy Inc. and Peabody Energy Corp. continued to weaken, just one day after the companies reported somewhat better-than-expected earnings.

In addition to weak coal prices, low natural gas prices have also played a role in the downturn of the sector.

“Natural gas at $2 is kind of tough for coal to beat,” a trader said.

Bombardier rises

Bombardier is reportedly seeking financial assistance from the Ottawa government, according to several news outlets.

It was also reported Wednesday that Quebec was ready to make a financial assistance off to the Montreal-based aerospace and transportation company.

“They were all up smartly on this news,” a trader said of the bonds, though he added that the paper “traded off a couple points from the [intraday] high.”

The trader said there was “heavy volume” in the 7½% notes due 2025, which closed a point better at 81. The 6% notes due 2022 improved over 1½ points to trade with a 79 handle, as the 6 1/8% notes due 2023 gained a deuce, closing at 79½.

The trader also saw the 7¾% notes due 2020 at 88 5/8, up a point, and the 7½% notes due 2018 at 97.

The latter issue was up over 2 points, the trader said.

At another desk, a trader said the bonds were “kind of all over the place.

“Initially they were up, but then they kind of gave back some of the early gains,” he said.

Still, he said the 6 1/8% notes – “the active one,” he said – ended in an 80 to 80½ context, up from Tuesday’s level of 78, but down from Wednesday’s high of 84.

The 2025 maturity was meantime seen around “82-ish,” down from 85 at the open, up better than Tuesday’s closing range of 79 to 80.

A third market source called the 7¾% notes due 2020 over a point better at 89 bid.

The CSeries jet was originally slated to hit the market in 2013.

The reports indicated that the Ottawa government was looking deeper into the company’s financials before agreeing to provide aid.

Consol debt drains

Consol Energy bonds remained under pressure on Wednesday, just one day after the company released its latest quarterly results.

A trader said the 8% notes due 2023 fell nearly a point to 73½, while another deemed the debt off 4 points at 73¼ bid.

On Tuesday, Pittsburgh-based Consol – a producer of coal and natural gas –reported net income of $119 million, or 52 cents per share, on revenue of $814 million.

By comparison, Consol posted a loss of $1.6 million, or a penny per share, on revenue of $885 million in the third quarter of 2014.

Revenue from gas and liquids declined 21% to $202 million, while coal sales declined 16% to $404 million.

Still, the overall figures were helped by the company’s cost-cutting efforts.

On an adjusted basis – which took away gains from recent asset sales, among other things – Consol had a loss of $64 million, or 28 cents per share.

Long-term debt at the end of the quarter was $2.78 billion.

Peabody lower

Peabody Energy was also on the softer side Wednesday.

The St. Louis-based coal producer reported its earnings on Tuesday as well.

One trader saw the 10% second-lien notes due 2022 falling 3 points to 34½, as the 6% notes due 2018 declined 6½ points to 22.

“Yikes,” the trader said.

A second trader said the bonds were “definitely weaker,” calling both the 10% and 6% notes “down another 4 points” at 33½ bid, 34 offered and 23, respectively.

At another shop, the 6½% notes due 2020 were seen at 19 bid, down 2 points.

Peabody reported a loss of $304.7 million for the third quarter. That equated to a loss per share of $16.73.

In the same period of 2014, net loss was $150.6 million, or $8.44 per share.

On an adjusted basis, EBITDA was $129 million and adjusted loss per share was $8.13.

Revenue was down year over year at $1.42 billion from $1.72 billion.

Analysts polled by Zacks Investment Research had forecast a loss per share of $8.20 on revenue of $1.37 billion.

Peabody also lowered in guidance on production, stating that it “expects additional coal production curtailments in response to current prices,” in the earnings announcement.

“In addition, limited capital spending is anticipated to act as a future supply constraint,” the company said. “Industry reports indicate a 70% decline in capital investment from the top coal producers from recent highs in 2012. The company anticipates that coal prices will need to rise well above current levels to incentivize new investment to maintain adequate supply to meet seaborne demand over time.”

Arch Coal wanes

Also in the coal space, Arch Coal Inc.’s unsecured notes fell to 2.5 cents on the dollar, according to a trader.

“Wow, they are almost to zero,” he said, noting that the debt was down half a point to a point.

On Tuesday, Arch said that it was terminating a previously proposed debt swap that was aimed at providing more liquidity to the company.

The nixed deal was due to the company being unable to secure lender approval on the offer.

In an effort to stave off a bankruptcy filing, Arch said it was engaged in discussions with creditors.

Intelsat, Millicom weaken

In the telecom space, a trader said Intelsat SA’s 7¾% notes due 2021 were off about a point ahead of the company’s Thursday earnings release.

He pegged the notes at 72½.

Elsewhere, a trader said Millicom – a company engaged in mobile phone services in emerging markets – was weaker, though there was no fresh news to act as a catalyst.

The trader saw the 6 7/8% notes due 2024 falling “8 and change” points to 80½.

Last week, Millicom announced that it had flagged “potential improper payments” on behalf of its Guatemalan unit. Though the company recently reported results that were better-than-expected, the news is expected to result in hefty fines for the company.

© 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.