Distressed bonds better as market rebounds; oil, gas issues follow crude to higher ground

By Stephanie N. Rotondo

Seattle, Dec. 15 – The distressed debt market rebounded with the broader markets Tuesday ahead of an expected interest rate increase from the Federal Reserve.

A trader said investors were taking advantage of “a load of low-hanging fruit” during the trading session.

The probable rate hike was also giving a boost to domestic crude oil prices, which ended up 2.2%, trading north of $37 a barrel. The commodity had dropped to near 11-year lows on Monday.

The gains in oil were mostly good for distressed oil and gas securities.

A trader said Oasis Petroleum Inc.’s 6 7/8% notes due 2022 jumped nearly 5 points “all on oil’s rebound,” closing at 74. Energy Transfer Partners LP’s 5½% notes due 2027 were also faring better, ending up a point at 75.

Denbury Resources Inc.’s 6 3/8% notes due 2021 also recovered, regaining 4 out of the 9 points lost on Monday to finish at 41½, according to a market source.

Among oil and gas preferreds, the results were a little more mixed on the day.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) slipped a penny to $5.51, as Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable perpetual preferred units (Nasdaq: VNRBP) popped by $1.08, or 20.49%, to $6.35.

Other commodity-linked names were also moving into higher territory.

In the steel space, United States Steel Corp.’s 7% notes due 2018 put on 2½ points, closing at 67 bid, a source said. AK Steel Holdings Corp.’s 7 5/8% notes due 2020 meantime improved over a point to 36¼ bid.

Navistar busy

A trader said Navistar International Corp.’s 8¼% notes due 2021 inched up half a point to 58¾ on “pretty heavy volume” on Tuesday.

The gains came despite a report that was making the rounds, which indicated that the Lisle, Ill.-based heavy truck manufacturer’s debt had dropped 40% since September as demand waned.

On Monday, Navistar’s equity (NYSE: NAV) hit a 52-week low after analysts at JPMorgan Chase & Co. downgraded the common shares. But as the market rebounded Tuesday, the stock regained some lost ground, ending up 63 cents, or 7.69%, at $8.82.

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