Distressed debt trading muted post-holiday; Magnum Hunter ‘way down’; commodities finish weaker

By Stephanie N. Rotondo

Phoenix, Oct. 13 – The distressed debt market was “a little bit softer,” a trader said Tuesday.

“I think guys are just getting back from the long weekend,” he said, as the bond market was closed for Columbus Day. On top of that, “the market ran up a fair amount last week, and I think things just kind of stalled today.”

Not helping matters was renewed concerns about an overabundance of oil, which pushed down domestic crude oil prices over 1% on the day.

In a report out Tuesday, the International Energy Agency said that crude demand would decline through 2016. That, combined with the return of Iranian oil to the marketplace, is causing many to think supply will be well more than needed.

As such, distressed oil and gas bonds were mostly lower on the day.

Magnum Hunter Resources Corp.’s 9¾% notes due 2020 were one of the sector’s biggest losers, dropping 6 points to 43 5/8, according to a trader.

“Those are way down,” he said.

On Friday, the Irving, Texas-based company said it had hired PJT Capital LP as financial advisers and Kirkland & Ellis LLP as legal adviser to explore its strategic alternatives. The company also chose to stop making its monthly dividend payments on its preferred shares.

While the dividends are suspended, they will accumulate until the company pays the amount in full. Additionally, nixing the monthly payment will not impact the company’s revolving credit facility or its other debt agreements.

The preferreds had declined about 50% in Monday trading but pared those losses come Tuesday.

The 8% series D cumulative preferreds (NYSE: MHRPD) rose 26 cents, or 5.62%, to $4.89. The 10.25% series C cumulative preferreds (NYSE: MHRPC) moved up 26 cents, or 7.82%, to $3.60.

Elsewhere in the sector, a trader said California Resources Corp.’s 6% notes due 2024 were “active” and off a point at 69.

However, he called the 5½% notes due 2021 a point better at 70 3/8.

At another desk, the 6% notes were pegged in a 68 to 69 context, down from 70 to 71 previously.

Chesapeake Energy Corp.’s 6¼% notes due 2020 were also seen a point lower, trading around 76½.

Houston-based Sanchez Energy Corp. saw its 6 1/8% notes due 2023 losing nearly a point to close at 69¼.

A trader noted that Linn Energy LLC paper was mixed on the day, as the 8 5/8% notes due 2020 gained over half a point to 35 1/8, but the 6½% notes due 2021 slipped 2½ points to 30½.

Commodities dip

Other commodity-linked bonds were also weakening Tuesday.

A trader said Peabody Energy Corp.’s 7 7/8% notes due 2026 fell almost a point to 22, while the 6¼% notes due 2021 slipped three-quarters of a point to 22¼.

That trader also saw AK Steel Holdings Corp.’s 7 5/8% notes due 2020 losing about a point to end at 58½.

A second trader said FMG Resources’ 9¾% notes due 2022 closed at 96½ bid, 97 offered, down from 99 last week.

“It just felt like there was some profit-taking in certain names,” he said.

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