Distressed debt steady, broader markets struggle; Chesapeake, Consol rise; iHeart better

By Stephanie N. Rotondo

Seattle, Jan. 6 – Despite a struggling equity market, the distressed debt space held its ground in midweek trading.

The broader markets sold off amid growing global concerns, as well as a rout in oil prices.

Earlier in the week, China released weak PMI figures, which resulted in a 7% decline in the country’s equity markets. The government stepped in at that point, halting trading. The country’s currency was also devalued, causing an already jittery market to further fret that a growth slowdown in the Asian nation could have a global impact.

Also playing a role was North Korea’s claim that it had tested a hydrogen bomb – or the “H-bomb of justice,” as it was deemed in a state-released press statement. If confirmed, such a test would likely increase tensions throughout Asia – and potentially add to the discord in the Middle East.

For its part, domestic crude prices dropped below $34 a barrel, a decline of 5.5% on the day. Prices have not been that low since 2008. The weakness was due in part to concerns about China and North Korea, but also to the latest report from the U.S. Energy Information Administration. While the newest figures show U.S. crude stockpiles declined by 5.1 million barrels last week, another 10.1 million barrels of gasoline were added to inventories.

Still, even oil’s hefty drop did little to move energy names such as Chesapeake Energy Corp.

In fact, one market source called the 6 5/8% notes due 2020 up 1½ points on the day at 34½ bid.

However, another source deemed the 8% second-lien notes due 2022 “a little lower,” trading in a 51 to 51½ context.

Even coal producer Consol Energy Inc. saw its bonds improving, despite announcing a capital expenditure budget for its oil and gas unit in 2016 that was over 40% less than what it spent in 2015.

A source pegged the 8% notes due 2023 at 67½ bid, up nearly 2 points.

Consol said Wednesday that it intends to spend $205 million to $325 million on oil and gas drilling in 2016. That compares to previous forecasts of $400 million to $500 million.

The cut was attributed to weakening commodity prices.

Additionally, Consol cut its yearly sales forecast for coal between 27 million tons and 32 million, down from the 30.6 million to 33.4 million tons previously expected.

“Unusually warm weather” was attributed as the cause for the weaker forecast.

iHeart paper rises

A trader said iHeartMedia Inc. bonds were better towards the end of the day on news Lamar Advertising Co. was looking to purchase some Clear Channel Outdoor assets.

The trader said the 10% notes due 2018 “traded up a couple points” to 40. Bonds linked to Clear Channel Outdoor were “up half a point to a point as well,” he said.

The billboard assets – valued at roughly $450 million – are located in Cleveland, Des Moines, Memphis, Reno and Seattle, sources told Reuters.

Clear Channel Outdoor is also looking at selling another $350 million to $400 million of assets. Proceeds from any of these sales will be used to reduce the parent company’s $20.6 billion in debt.

© 2015 Prospect News.
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