Oil, commodity prices slammed; distressed energy bonds soften; Arch steady to lower

By Stephanie N. Rotondo

Seattle, Jan. 11 – Oil prices plummeted Monday, pushing already distressed energy bonds even lower, according to traders.

Domestic crude oil declined 5.55% on the day, trading down to $31.32 a barrel – levels not seen since 2003.

In response, Chesapeake Energy Corp.’s debt was trending downward.

A trader said the recently issued 8% second-lien notes due 2022 slipped a point to 50½.

However, another trader said that paper fell below 50 in Monday trading.

The first trader also saw the 7 1/8% notes due 2020 losing nearly a point to close at 95 1/8.

At another desk, Chesapeake’s 6 5/8% notes due 2020 were seen off 1½ points at 33 bid.

Also drifting lower were California Resources Corp.’s 8% notes due 2022, a trader said. Those bonds slumped over a point to 50½, as the 5% notes due 2020 slipped to 35.

Some names in the oil and gas sector experienced larger declines for the day.

Atwood Oceanics Inc., for instance, lost “another 3 points,” a trader said, seeing the 6½% notes due 2020 finishing at 44.

Last week, a trader told Prospect News that there was a “big seller” of the paper, which had sent the debt’s value tumbling.

Meanwhile, Approach Resources Inc.’s 7% notes due 2021 ended with a 29 handle, according to one trader. He said that compared to wide quotes in a 30 to 40 context.

Away from oil, the coal sector held up well despite news that Arch Coal Inc. had filed for bankruptcy. But First Quantum Minerals Ltd. paper retreated as copper prices fell to over six-year lows.

Arch enters bankruptcy

Arch Coal filed for Chapter 11 protections on Monday.

The filing upped Fitch Rating’s trailing 12-month default rate for the metals and mining sector to 15%, up from 11% at the end of December, the agency said in a statement.

On the news, a trader remarked that there “wasn’t much” going on in the bonds, though he saw the 8% notes due 2019 dropping “a couple points” to 2.

“The other ones are already trading at a fraction,” he noted of the rest of the capital structure.

A second trader saw the 7¼% notes due 2021, 9 7/8% notes due 2019 and 7% notes due 2019 all ended at three-quarters of a point.

“That’s kind of in line with where they were,” he said, suggesting that the market was already anticipating the bankruptcy filing.

But while Arch was trending unchanged to lower, other coal names were inching up.

A trader saw Peabody Energy Corp.’s 6½% notes due 2020 edging up a touch to 11¾. A second source pegged Consol Energy Inc.’s 8% notes due 2023 at 69 bid, up 1½ points on the day.

St. Louis-based Arch said in court papers that it has inked a debt-for-equity deal with senior lenders that would give the group a majority of the new equity in the reorganized company. The company has also lined up $250 million in debtor-in-possession financing.

Unsecured holders will receive a small portion of the equity.

If approved by creditors as a whole, the plan will reduce the company’s debt by $4.5 billion.

In October, Arch nixed a debt swap with its lenders. In December, the coal producer opted not to make a $90 million interest payment.

First Quantum fizzles

First Quantum’s 7¼% senior notes due 2022 were “down a lot,” a trader said Monday.

The trader said the issue fell “a few points,” trading into the mid-50s.

“A lot of copper names were down today with the copper price getting hammered,” he said.

Copper futures fell a nickel, or 2.35%, to $1.97. The declines have been attributed to concerns about China’s economy.

The trader also remarked that the Vancouver, B.C.-based mining company was downgraded last week.

Navios hits the skids

Navios Maritime Holdings Inc.’s 8.625% series H cumulative redeemable perpetual preferreds (NYSE: NMPH) were weakening as the paper went ex-dividend.

The preferreds fell 89 cents, or 15.86%, to $4.72.

A market source said the issue was yielding about 46%.

“It’s a little sketchy,” he said of the Monaco-based drybulk shipping company. While the company did declare a dividend on its preferreds about a month ago, “everyone is expecting them not to pay” going forward,” the source said.

Holders of the Hs will receive 53.90625 cents per share on Jan. 15. Holders of the 8.75% series G cumulative redeemable pereptual preferreds (NYSE: NMPG) will meantime receive 54.6875 cents per share.

The dividend covers the period from Oct. 15 to Jan. 14.

© 2015 Prospect News.
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