Weakness remains in distressed bond market; crude leads energy sector downward

By Stephanie N. Rotondo

Seattle, Sept. 14 – The distressed bond market was soft in midweek trading, though traders again noted that investors were bypassing the riskier credits for higher-rated high-yield issues.

One trader noted that Kinetic Concepts Inc.’s $400 million of 7 7/8% notes due 2021 – an issue that priced Tuesday – was a big focus of the day.

“That’s where all the activity was,” he said.

Another trader said that the more “on-the-run” high yield names were busier than their distressed peers, though he added that such securities were also trading with a weaker tone.

A decline in domestic crude oil prices was leading the energy arena downward and was also deemed the reason that the equity markets ended mostly in the red.

Crude dropped 2.66% to $44.27 a barrel as the U.S. Energy Information Administration reported that crude inventories fell by 559,000 barrels last week. While that was better than the 3.8 million-barrel increase analysts had expected, a larger-than-expected gain in distillate stockpiles weighed on the commodity.

With crude’s weakness, a trader said Whiting Petroleum Corp.’s 5% notes due 2019 fell almost a point to 91.

He added that the paper traded “pretty actively.”

EP Energy Corp.’s 6 3/8% notes due 2023 were also lower, slipping a quarter-point to 55¼.

Denbury Resources Inc. was another name under pressure, as a trader pegged the company’s 5½% notes due 2022 at 64½.

He called that down over a point on the day.

© 2015 Prospect News.
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