Distressed bonds improve with broad market; oil and gas firm on crude rally; coal rebounds

By Stephanie N. Rotondo

Phoenix, May 21 – There was definite strength in the distressed debt market on Thursday, as the dollar weakened and oil prices improved.

However, traders said liquidity was starting to wane ahead of the Memorial Day holiday.

“I think that might be it for the week,” one trader said.

Crude oil prices rallied on Thursday as new data showed a drawdown of U.S. crude futures at the Cushing delivery point, indicating that the country’s current supply glut could be dwindling.

West Texas Intermediate crude rose $1.74, or 2.95%, to $60.72 a barrel, while Brent crude gained $1.49, or 2.29%, to $66.52.

The dollar’s weakness and growing security issues in the Middle East were also playing a role in the gain.

As for the distressed oil and gas space, bonds were ending mostly better.

SandRidge Energy Inc. in particular was on the rise, after several sessions of sizable losses.

Energy XXI Ltd.’s debt was also improving.

However, W&T Offshore Inc.’s 8½% notes due 2019 slipped in trading by over a point to 73¾.

In the coal arena, bonds were also seen improving.

One trader said Peabody Energy Corp.’s 10% notes due 2022 “rebounded back a little bit,” ending around 80.

“Maybe it was a relief rally,” he said.

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