Dealers seemed to breathe a collective sigh of relief Wednesday evening following Allied Waste's third-quarter earnings release as fears of more credit defaults in a soft economy had the market bracing for bad news. Dealers noted that Allied's earnings loss was not as bad as they had expected, and that overall the credit still appears relatively strong. Bids for the paper promptly notched up to 96 1/8-7/8 from the 96 range earlier in the day. An estimated $10 million had traded by late Wednesday. The trash-hauling company is based in Scottsdale, Ariz. Calls to Mike Burnett, head of investor relations, were not returned.
The levels had been hovering in the 96 range following the late October departure of the company's chief operating officer and anticipation over the earnings figures. "People took the coo resigning right before the numbers came out as a bad sign," a dealer remarked. Market players noted the mixed-bag figures, but said to keep them in perspective. "The numbers are a little softer, but it shouldn't be a real surprise in the current economy. People were just worried that there would be a credit surprise and they'd be blindsided." The third quarter EBITDA was $497.7 million, compared to $533.5 million in the third quarter of 2000. Tom Van Weelden, chairman and ceo of Allied Waste, noted in the release that the events of Sept. 11 have pressured volumes and pricing, particularly in the landfill and roll-off business.
Prior to the company official's departure, Allied had always been touted as one of the strongest and most liquid credits, but started to soften with a sagging economy. Dealers noted commercial trash hauling can feel some seasonal swings, but that residential hauling is stable. "At the end of the day, I always take my trash out," a trader remarked. In late October, Allied's levels seemed to be firming, hitting 97 ½, after a drop from 98 (LMW, 10/28).