Cliffs unchanged, better ahead of earnings; W&T Offshore bonds come in; Colt debt on the rise

By Stephanie N. Rotondo

Phoenix, April 27 – The distressed debt market was on the subdued side Monday, as investors prepare for the Federal Reserve’s two-day policy meeting slated for Tuesday, as well as another round of corporate earnings.

With earnings in mind, Cliffs Natural Resources Inc. was being eyed as the iron ore producer readied its latest quarterly report for Tuesday’s release.

Ahead of the numbers, one trader said the name was “pretty much in line with where it went out on Friday,” seeing the 8¼% first-lien notes due 2020 in a 98½ to 99 context and the 5.95% notes due 2018 in a 79 to 80 zip code.

But another trader deemed the 2018 paper nearly a point better at 80.

For the first quarter, the Cleveland-based company is expected to post a narrower loss due to lower production costs. However, revenue is forecast to be particularly weak.

In addition to the bottom line, investors will also be interested in hearing about further asset sales and cost-cutting plans as the iron ore market remains depressed.

Meanwhile, W&T Offshore Inc.’s 8½% notes due 2019 slipped in Monday trading as the company announced it had amended and restated a revolving credit agreement.

A trader saw the issue falling half a point to 71.

In a regulatory filing, the Houston-based offshore oil producer said it had amended a $1.2 billion credit agreement to allow for the issuance of new debt.

In return, the company agreed to reduce the borrowing base to $600 million from $800 million – with another automatic reduction occurring Oct. 1 whether new debt has been issued or not – and raised the interest rate by 50 basis points.

The amendment also revised certain covenants. Any issuance of new debt will require the company to be in compliance with those new levels.

Colt bucks up

A trader said Colt Defense LLC’s 8¾% notes due 2017 popped in Monday trading, though there was no fresh news to act as a catalyst.

The bonds improved by nearly 3 points, he said, ending at 30¾.

On April 14, the West Hartford, Conn.-based gun manufacturer said it was exchanging the 8¾% notes for new 10% junior priority senior secured notes due 2023. For each $1,000 of 8¾% notes tendered, holders will receive $300 in new notes.

Those holders who agree to support a prepackaged bankruptcy plan will also receive an additional $50 in new notes.

Colt needs to have at least 98% participation in the exchange or else it could be forced to file for bankruptcy.

Earlier in the month, the company put off filing its latest quarterly results.

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