Distressed energy bonds pressed as oil prices stay in retreat; Navios downgraded, preferreds soften

By Stephanie N. Rotondo

Seattle, Jan. 12 – Distressed commodity-linked bonds were drained Tuesday as oil prices continued to falter.

“Some things were just getting slaughtered, anything commodity related,” a trader said. “There was more pain in the oil and gas industry.”

Domestic crude oil prices weakened 2.32% to $30.68 a barrel. The commodity did trade sub-$30 briefly – and ticked up as high as a $32 handle.

Oil’s continued decline was made worse Tuesday by the unclear intentions of OPEC. Nigeria’s Emmanuel Kachikwu – the country’s top oil official and OPEC’s outgoing president – indicated in an interview with CNN that some members of the cartel were interested in holding an emergency meeting to decide whether or not to curtail production.

But later in the day, Suhail Mohammed Al Mazrouei, energy minister of the United Arab Emirates, said he felt it was “unfair” to ask OPEC to unilaterally lower its production.

OPEC has previously been steadfast in its refusal to cut output as it attempts to take market share from the U.S.

As oil prices fell, a trader said Oasis Petroleum Inc.’s debt “got hit pretty hard.”

He saw the 6 7/8% notes due 2022 trading with a 57 handle, which compared to 62 previously. The 6½% notes due 2021 slipped to a 55 to 57 zip code, down from 61 on Monday.

In California Resources Corp.’s bonds, a trader said the 6% notes due 2024 went out in a 27 to 28 context versus the 30 to 31 range seen Monday. The 5% notes due 2020 then waned to 33, down from 35.

Energy XXI Ltd. meantime “got beat up,” a trader said. The 9¼% notes due 2017, for instance, dropped 3 to 4 points to 23.

Among distressed energy preferred stocks, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) dropped 66 cents, or 14.01%, to $4.05. Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) meantime lost 81 cents, or 11.96%, closing at $5.96.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) were one of the biggest losers on the day, falling $1.08, or 21.64%, to $3.91.

Elsewhere in the commodity space, First Quantum Minerals Ltd.’s 7¼% notes due 2022 “continued to trade lower,” according to a trader.

The trader said the issue was off “4 points intraday,” ending around 50.

Navios sinks

Navios Maritime Holdings Inc.’s preferreds continued to retreat on Tuesday, as Moody’s Investors Service cut its rating on the Monaco-based dry bulk carrier.

The 8.625% series H cumulative redeemable perpetual preferreds (NYSE: NMPH) fell 49 cents, or 10.38%, to $4.23. The 8.75% series G cumulative redeemable pereptual preferreds (NYSE: NMPG) lost 52 cents, or 11.06%, to $4.18.

The issues went ex-dividend on Monday, as a dividend is slated to be paid on Jan. 15. The dividend covers the period from Oct. 15 to Jan. 14.

One corporate bond trader said he didn’t see much trading in the company’s debt.

Moody’s dropped Navios to Caa1 from B2, citing “continued challenges in the dry bulk market.” The agency said it also believed that market conditions in that sector would fail to improve in 2016.

© 2015 Prospect News.
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