Implosion of equities, commodities weigh on distressed bonds; Peabody Energy debt dips post-earnings

By Stephanie N. Rotondo

Seattle, Feb. 11 – The distressed debt market took another tumble Thursday amid the decline of the broader markets.

“A lot of things were weaker today,” a trader said. “There was more erosion in the energy space.”

That erosion came as domestic crude oil prices continued to retreat, falling nearly 3% to $26.63 a barrel. On top of that, Peabody Energy Corp. released “poor earnings,” according to a trader.

Not surprisingly, the coal producer’s debt fell on the heels of the release. News the company planned to draw down a credit facility didn’t do much to help matters either.

But as the market ebbed yet again, trading volume started to dissipate.

“There was a limited amount of activity,” a trader said. “The market is almost paralyzed on days like today.”

Peabody off with earnings

Peabody Energy reported a wider fourth-quarter loss on Thursday, putting pressure on the St. Louis-based company’s bonds.

A trader said the 10% second-lien notes due 2022 traded down into a 7˝ to 8 context.

The trader also noted that trading in the name was “not exceptionally active.”

At another shop, Peabody’s 6˝% notes due 2020 were seen at 3˝ bid, down 2˝ points on the day.

For the quarter, Peabody reported a loss of about $519 million, which compared to a loss of $513 million the year before.

Revenue fell 22% to $1.3 billion. The decline was attributed to fewer domestic shipments in the U.S. and weaker pricing in Australia.

For all of 2015, net loss came to over $2 billion, significantly wider than the $777 million loss seen in 2014. Part of that was due to $23.5 million booked in restructuring charges.

Revenue dropped 17% to $5.6 billion.

In the financial report, Peabody also noted that it had drawn down the remaining amounts available under its $1.65 billion revolving credit facility, leaving it with liquidity of $902.6 million.

As for the rest of the energy space, a trader said California Resources Corp.’s 8% second-lien notes due 2022 were “one of the more active ones,” slipping to a 19˝ to 20 zip code.

Energy XXI Ltd.’s 11% notes due 2020 meantime “continued to drift lower,” trading down to 10˝ bid, 11 offered.

That issuer was slated to release earnings on Monday, but said in a regulatory filing on Wednesday that the results would be delayed.

© 2015 Prospect News.
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