Distressed bonds finish week’s ‘lift-a-thon’ with firm tone; oil and gas debt improves; CHC volatile

By Stephanie N. Rotondo

Seattle, March 4 – The distressed debt market closed out the week strong, according to market sources.

“Everything is ripping,” one trader said. “It’s a lift-a-thon.”

The trader also remarked that ETF inflows were around $5 billion this week, the “biggest of all-time.” He also opined that “because momentum has completely shifted in that market,” a short squeeze might also be playing a role in the market’s gains.

The broader markets were likewise firm following a new jobs number. The latest report from the Labor Department showed non-farm payrolls increasing by 242,000 in February. Additionally, December and January figures were revised to include another 30,000 new jobs.

Market watchers had been predicting an add of 190,000 last month.

Additionally, crude oil prices continued to rally, jumping nearly 4.5% in Friday trading to end at $36.10 a barrel.

“Oil broke through $36,” a trader noted, using that to explain gains in the distressed oil and gas space.

“It probably doesn’t account for all of it, but it could,” he said.

Continental Resources Inc. was “very actively traded,” a trader said. Volume in the 5% notes due 2022 and the 4½% notes due 2023 combined to equal “almost $100 million,” he said.

The 5% notes closed at 87, up over 3 points, as the 4½% notes ended at 83, up over 2½ points.

The trader also saw the 3.8% notes due 2024 ticking up 4 points to 78¼.

In Chesapeake Energy Corp., a trader said the 8% second-lien notes due 2022 firmed by 3 points to 52. Another trader echoed that level, but compared it to Thursday’s levels of 48.

California Resources Corp.’s 8% notes due 2022 were also on the rise, finishing almost 3 points better at 42¼, a trader reported.

Other commodity-linked names were also climbing higher. A trader said First Quantum Minerals Ltd.’s was “up a couple points,” with the 6¾% notes due 2020 ending at 63 and the 7% notes due 2021 trading up to a 61 to 62 context.

In mid-February, the mining company warned that its ability to continue as a going concern was in jeopardy given the company’s high debt burden and the current weak metal price environment.

CHC gyrates post-numbers

CHC Helicopter’s 9¼% notes due 2020 initially traded down, but rebounded to “finish unchanged,” a trader said.

He said the paper traded down to a low of 34 but came back up to settle around 37.

The “intraday volatility,” as the trader called it, came after the company’s parent entity, CHC Group, reported results for the fiscal third quarter.

Consolidated revenue fell to $333 million from $415 million the year before, due to unfavorable currency exchanges, as well as the challenging oil and gas market. Net loss, however, shrank to $76 million from $465 million the previous year.

On an adjusted basis, net loss was $32 million, versus $30 million for the same quarter of 2015.

In addition to announcing its latest quarterly results, Vancouver, B.C.-based CHC Group also said that it had retained Seabury Advisors, PJT Partners and CDG Group as financial advisors and Weil, Gotshal & Manges LLP as legal advisors to look into the company’s strategic options. Those options included, but were not limited to, a reduction in aircraft lease and interest costs, as well as the company’s purchase commitments.

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