Distressed energy credits rise as oil rallies over 5%; Peabody mixed; FMG paper rebounds

By Stephanie N. Rotondo

Phoenix, April 6 – A gain in oil prices gave a boost to the distressed debt arena on Monday.

Investors were also shaking off Friday’s weak jobs report, which showed 126,000 nonfarm jobs being added in March – about 120,000 less than expected. The results have caused some to speculate that any plans the Federal Reserve had to raise interest rates could be stymied.

Despite the firm tone of the day, the market was still suffering from a post-holiday hangover.

“There wasn’t really a lot of volume,” a trader said. “It felt like a sleepy Monday after a long holiday weekend.”

Of the day’s dealings, the energy space was getting the lion’s share of the gains.

At one desk, a market source saw SandRidge Energy Inc.’s 7½% notes due 2021 rising a deuce to 65½ bid.

In the preferred stock space, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) improved 71 cents, or 3.44%, to $21.36, while Goodrich Petroleum Corp.’s 9.75% series D cumulative preferreds (NYSE: GDPPD) put on 31 cents, or 3.93%, to close at $8.19.

Another trader saw Samson Resources’ 9¾% notes due 2020 at 15½.

But some oil and gas names did not receive any benefit from the oil rally.

A source placed Linn Energy LLC’s 7¾% notes due 2021 at 80½ bid, off nearly a point.

For its part, West Texas Intermediate crude oil gained $2.81, or 5.72%, to $51.95 per barrel. Brent crude jumped $2.91, or 5.3%, to $57.86.

The gain in oil was attributed partly to word that Saudi Arabia had increased prices to its Asian customers – indicating a gain in demand in that region – and partly to the realization that an end to oil-exporting sanctions in Iran will likely not have much impact on supply in the near term.

Away from oil, coal producer Peabody Energy Corp. saw its 6½% notes due 2020 inching up to 59½ bid. However, another trader saw the 10% notes due 2022 – a $1 billion deal that came March 5 – holding steady at 86.

Aside from energy, FMG Resources’ debt was “creeping back up,” a trader said, through there was no specific news to act as a catalyst.

The trader said the 8¼% notes due 2019 ended in an 81 to 82 context, while the 6 7/8% notes due 2022 closed “north of 70.”

Another source pegged the 6% notes due 2017 at 96½ bid, up a point.

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