Distressed bonds firm on Greece deal; Fortescue debt active as Vale cuts production; coal soft

By Stephanie N. Rotondo

Phoenix, July 13 – The distressed debt market started the week off strong as Greece and its European creditors were said to have hammered out a last-minute bailout agreement.

Details of what that deal entails have been fuzzy, but it has been reported that this bailout – the third the country has wrangled – includes the harshest terms yet. The deal allows the European Union to give new loans to the country so that in can avoid a default, but in return, the nation must impose tax hikes on its citizens.

The rescue package still needs to be passed by Greek parliament.

But while news of the bailout did push up the marketplace, a trader noted that there “weren’t any real big outliers” in the distressed realm.

He did, however, see Fortescue Metals Group Ltd.’s debt trading “busy again,” following news that Vale SA was cutting its production in an effort to boost profit.

“The Vale pressure maybe helps some of the downward pressure on pricing,” the trader remarked.

In response to the Vale news, FMG bonds “opened lower, but kind of rebounded a little bit.”

The trader saw the 9¾% notes due 2022 hitting a low of 94 before moving back up to 95½. The 8¼% notes due 2019 meantime traded down as low as 74¼, but went out around 75, he said.

At an industry conference in Sao Paulo, Brazil, Vale executives announced that it would begin cutting production – particularly of low-quality iron ore – by 25 million metric tons, beginning this month. Instead of focusing on volume, the company is electing instead to zero in on margins.

In April, Vale – the world’s largest iron mining company – said it was considering cutting production by as much as 30 million metric tons.

Elsewhere in the commodity space, a trader said “coal continues to be soft,” though he added that there “wasn’t a lot of volume” in the sector.

The trader saw Peabody Energy Corp.’s 10% notes due 2022 ending “just below 56.”

However, another market source pegged the 6½% notes due 2020 at 29¾, up nearly a point on the day.

© 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.