Distressed debt market firm going into weekend on Greece hopes; commodities end mostly better

By Stephanie N. Rotondo

Phoenix, July 10 – The driving factors of the day continued to be Greece and China. For its part, Greece unveiled a new debt proposal late Thursday. The reforms were expected to be evaluated as early as Friday by E.U. creditors and the country’s government even has a vote planned for later in the day.

As for China, its stock market continued to improve, spurred in part by new supportive measures enacted this week and in part by hopes Greece can get its act together.

While the Greek and Chinese factors have brought a bit of a relief rally, Friday brought with it another potential volatile item: that is, Janet Yellen, Federal Reserve chairman, and a speech she gave at the City Club in Cleveland at midday.

The market will be going over the speech with a fine-tuned comb, looking for any indications she might give as the central bank’s thoughts on the current crisis around the world and how that might impact an interest rate increase in the United States later this year. The Fed has been maintaining that any increase would be “data dependent,” so now the market is curious as to what data matters and what does not.

In her speech, Yellen indicated optimism for the U.S. economy and expressed her belief that an interest rate increase would be needed toward the end of 2015. She also didn’t appear much fazed by what’s going on in the global economy, instead underlying her opinion that strengthening the U.S. economy is much more imperative.

As for the day’s distressed dealings, activity was muted as investors instead zeroed in on a $15.5 billion six-part bond issue priced by Charter Communications Inc. on Thursday. Proceeds from that offering will be used to fund the company’s acquisition of Time Warner Cable Inc.

“All the volume was in the new Charter deal,” a trader said, adding that the deal was “practically investment grade.”

Commodities mostly firm

Aside from the Charter deal, commodities remained the focus of distressed investors.

A trader said Fortescue Metals Group Ltd.’s bonds continued to be active, adding that “they didn’t really move even though the market was up.”

He said the 9¾% notes due 2022 were “still” around 95, while the 8¼% notes due 2019 were holding around 76.

In oil and gas names, California Resources Corp.’s 6% notes due 2024 “continued to creep back up a little bit,” ending around 84.

Among coal bonds, the results were a little more mixed.

A trader said Arch Coal Inc. paper was “drifting back in” after moving up earlier in the week in response to a debt-for-debt exchange offer.

In particular, he said the 8% second-lien notes due 2019 were “trending even lower,” moving “just below 18.”

On July 2, the coal producer announced two concurrent private debt exchanges that are aimed at cutting its $2.875 billion in unsecured bonds in half.

Also in the coal arena, Alpha Natural Resources Inc.’s 6¼% notes due 2021 inched up half a point to 7 bid, according to a market source.

National Bank of Greece rises

Greece has put a third debt reform proposal on the table and E.U. leaders are slated to look into the plan ahead of a summit meeting on Sunday.

This latest proposal includes pension reforms and tax increases, but have been labeled as more conservative by the Greeks and as potentially workable by some in the European Union, including France and Italy.

Hopes that the deal could go through gave rise to the markets across the board and also boosted National Bank of Greece SA’s $2.25 series A noncumulative preference shares (NYSE: NBGPA).

The paper closed the day up 69 cents, or 13.24%, at $5.90.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.