Distressed bonds weak as oil drops, IMF forecasts cut; Caesars active amid noteholder boon

By Stephanie N. Rotondo

Phoenix, Jan. 20 – The distressed debt market was dragged lower on the first session back from the long weekend, as oil prices remained in retreat and the International Monetary Fund lowered its global growth forecast by the most in three years.

Additionally, earnings season was in full swing, prompting one trader to opine that “we’ll probably see some volatility” as more results come out.

As for the IMF report, it cut its 2015 global growth forecast to 3.5%, down fro 3.8% in October.

Growth for 2016 was then pegged at 3.7%, down from 4% in the previous report.

In distressed dealings, traders said Caesars Entertainment Corp.’s 10¾% notes due 2016 were trading actively – and better – as investors digested news out Monday that could impact the company’s restructuring plan.

On Monday, U.S. District Judge Shira Scheindlin gave credence to junior noteholders’ claims that Caesars was looking to thwart their recovery prospects by moving around assets.

While Caesars itself believes that it did no wrong by eliminating guarantees on junior debt back in August, it could give lower-ranking creditors more clout as they look to fight against a plan that would give first-lien noteholders a 92% recovery and junior noteholders barely more than 10%.

Meanwhile, FXCM Inc. was “by far the most notable distressed name,” a trader said Tuesday. The company’s convertible bonds have been on a ride since Friday, when the company said it could be facing a multitude of customer losses as the Swiss franc gained value.

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