Distressed bonds decline with broad markets on Greece, China fears; energy names active

By Stephanie N. Rotondo

Phoenix, July 8 – There continued to be weakness in the distressed debt space on Wednesday.

The broader markets were also trending toward the red, as Greece continued to rail against the European Union’s austerity ideas, though Greek officials did relent and say that a more detailed budget proposal was going to be made by the end of the week.

Furthermore, late in the day it was reported that Greece intended to keep its banks closed until Monday.

But that wasn’t the only news investors were considering. China’s stock market remained under pressure, despite attempts by the government to shore up any major losses. And the Federal Open Market Committee released its June minutes, which showed that while Fed officials were seeing bright spots in the U.S. economy, concerns about Greece and China were not being pushed aside.

“Take your pick,” a market source said of the many reasons the market could be sluggish.

As if to make matters worse, the New York Stock Exchange was hit with a technical glitch that halted trading on that platform for over three hours.

Back in the bond market, it was all energy, all the time.

“Energy is still active,” a trader said. “That’s all I’m running into, energy, energy, energy.”

For its part, oil was down on the day as well, as West Texas Intermediate crude fell 54 cents, or 1.03%, to $51.79 a barrel. Those losses were attributed to the latest report from the U.S. Energy Information Administration, which showed a surprise gain in both crude and gasoline stockpiles.

In the coal arena, a trader said Peabody Energy Corp. was “rebounding this morning before renewing their charge downward.”

The declines came even as the company said it had agreed to sell its Wilkie Creek Mine and associated asset in Queensland to Sekiten Resources Pty. Ltd. for $75 million, including up to $20 million in cash and the assumption of up to $55 million in liabilities.

The trader also remarked that there was a report going around from Citigroup on the company.

The 10% notes due 2022 fell 3 points to 57, according to the trader. The 6% notes due 2018 “rallied smartly” early in the day, moving up to “43 and change.” However, by the bell, the issue came down from the day’s high to close at 40.

The trader said that was still up a touch day over day.

As for the 6¼% notes due 2021, the trader called those unchanged at 27½.

Another market source deemed the 6½% notes due 2020 a point weaker at 29 bid.

Among other coal names, a trader saw Alpha Natural Resources Inc. and Arch Coal Inc. on the slide as well.

In Alpha Natural paper, the 9¾% notes due 2018 held steady at 6. But both the 6¼% notes due 2021 and the 6% notes due 2019 fell nearly a point to 6½.

A second source placed the 2021s at 6½ bid, down over a point.

In Arch Coal, the 7¼% notes due 2021 slipped slightly to 12 5/8, while the 7% notes due 2019 weakened a point to 15.

The 9 7/8% notes due 2019 lost over half a point, closing at 17.

Iron, oil decline

Elsewhere in the commodity arena, iron ore producer Fortescue Metals Group Ltd. saw “heavy volume” trading in its bonds. The debt was also weaker as the market continued to react poorly to ongoing iron ore price weakness.

A trader called the 9¾% notes due 2022 down almost 3 points at 96. The 8¼% notes due 2019 fell 4 points to 76½.

The 6 7/8% notes due 2022 were the biggest loser, dropping 5 points to 60.

Oil and gas names were also trending toward the down side, though there were a couple issues that managed to perk up.

A trader said California Resources Corp.’s bonds remained active, with its 6% notes due 2024 losing “another point” to close at 82. However, he said there was a “little bounce” in the 5½% notes due 2021 and the 5% notes due 2020. He deemed both issues up almost 2 points, at 84 and 85, respectively.

In SandRidge Energy Inc., the 8¾% notes due 2020 were placed at 85, down over 2 points. But the 7½% notes due 2021 inched up a touch to 38½.

And in Linn Energy LLC’s 7¾% notes due 2021, those finished 1½ points softer at 73½.

© 2015 Prospect News.
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