Distressed bonds gain as Yellen comments boost markets; energy sector holds; Toys edges higher

By Stephanie N. Rotondo

Phoenix, Feb. 24 – The distressed debt market held up Tuesday, rising with the equity markets as Janet Yellen, the chairman of the Federal Reserve, told a Senate committee that the central bank was looking to be more flexible on its looming interest rate increase.

The Fed will first drop the use of the word “patient,” a term used since December when the agency said it would take its time to raise rates.

Second, the Fed will adopt a “meeting-by-meeting” approach to the rate raise. Some market watchers are speculating that the hike – which was previously expected to occur around June – could be pushed back to October.

Oil prices were also initially higher, but ended slightly weaker. However, distressed energy names held up rather well.

Midstates Petroleum Co. Inc.’s 10¾% notes due 2020 put on over half a point, ending at 63 7/8, according to a trader. The 9¼% notes due 2021 rose a quarter-point to 62.

Chaparral Energy Inc.’s 7 5/8% notes due 2022 were also better, gaining 1¾ points to close at 76½.

Goodrich Petroleum Corp. was another gainer, as its 8 7/8% notes due 2019 inched up to 41 7/8.

Some names, however, were holding on just barely.

Quicksilver Resources Inc.’s 7 1/8% notes due 2016 was up a touch to 1, though the paper had touched lower at 85 cents on the dollar, a trader said. But its 11% notes due 2021 held steady at 10¼.

Linn Energy LLC paper was also mixed. The 6¼% notes due 2019 were unchanged at 86, but the 8 5/8% notes due 2020 weakened nearly half a point to 89¾.

And, SandRidge Energy Inc.’s 7½% notes due 2021 ended unchanged at 73.

In other commodities, coal names were continuing to see modest gains.

A trader said Arch Coal Inc.’s 7¼% notes due 2021 were trading up to 30. Another trader echoed that level, calling the issue up almost half a point.

The second trader also noted that the 7% notes due 2019 were unchanged at 31.

Alpha Natural Resources Inc.’s 6% notes due 2019 were meantime a quarter-point better at 29¾.

Toys holds on to gains

A trader said Toys “R” Us Inc. debt “held its gains from yesterday,” with even the 10 3/8% notes due 2017 managing to trade a “little higher.”

He pegged the issue at 84¾.

Another trader said the 7 3/8% notes due 2018 held in at 66½.

On Monday, the company made a presentation at the JPMorgan Global High Yield and Leveraged Finance Conference in Miami. In the presentation, the Wayne, N.J.-based retailer announced preliminary quarterly results that seemed to please investors, who in turn boosted the company’s bonds.

For the quarter, the Wayne, N.J.-based retailer said net sales fell to $12.4 billion from $12.5 billion. U.S. sales dropped 4.5% and international sales improved 2.2%.

Adjusted EBITDA is expected to be about $57 million.

Meanwhile, Gymboree Corp.’s 9 1/8% notes due 2018 “continued to climb a little,” a trader said, placing the paper at 45.

Another trader said Claire’s Stores Inc.’s 7¾% notes due 2020 improved about 1½ points “from about a week ago,” ending at 37.

© 2015 Prospect News.
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