Distressed bond market improves; energy space rises despite oil’s decline; MolyCorp gains

By Stephanie N. Rotondo

Seattle, Jan. 5 – There was strength in the distressed debt market, particularly in the energy space, a trader said.

“The whole energy and mining space was bouncing off recent lows,” the trader said.

That came even as oil prices fell 2.39% on the day, as tensions between Saudi Arabia and Iran caused concerns about OPEC and its production limits. Despite the current global oversupply of oil, OPEC has refused to cut its production – and the drama between the two Mideast countries has resulted in speculation that it will be even harder for them to work together.

Also concerning energy investors is the upcoming inventory report from the U.S. Energy Information Administration. Chatter is that the latest weekly report will show yet another build of stockpiles.

Still, it was a positive day for distressed energy names.

Even Chesapeake Energy Corp. benefitted from the day’s tone. A trader said there was “very heavy volume” in the 8% second-lien notes due 2022, which gained nearly 2 points to end at 51. The 3¼% notes due 2016 meantime put on almost a point, closing at 97, as the 4 7/8% notes due 2022 jumped 5 points to 33.

The trader also saw the 5¾% notes due 2023 improving, adding 1½ points to 30½.

A second trader said the new second-liens bounced up “a few points” to trade around 52. A third market source pegged the 6 5/8% notes due 2020 at 33 bid, up over 3 points.

Breitburn Energy Partners LP was another gainer for the day. A trader placed the 7 7/8% notes due 2022 at 19¼, up a deuce. The 8 5/8% notes due 2020 gained a point, finishing at 20.

Denbury Resources Inc. – which recently launched an exchange offer for three series of notes – also ended higher, with its 4 5/8% notes due 2023 pushing up a point to 33, according to a trader.

Another source deemed the 6 3/8% notes due 2021 up nearly a point at 37¼ bid.

MolyCorp pops

Mining names were also experiencing a bit of a rebound on the day. MolyCorp Inc. was leading the pack, as a trader said its 10% notes due 2020 “popped” to 12 from 5.

The gains came after it was reported that the bankrupt rare earth minerals mining company had received bids for assets at much higher valuations than previously expected.

For MolyCorp’s non-U.S. assets, Aluminum Corp. of China Ltd. was said to have made a bid of over $700 million – well over the $391 million to $443 million the company had valued the assets at in Dec. 24 court documents. Shenghe Resources Holdings Co. and Galaxy Resources Ltd. were also said to have made better-than-expected bids.

Domestically, it was reported that Carlyle Group LP was also considering making an offer on the assets.

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