Distressed bond rebound ends as profit-takers come in; oil and gas falls with crude; iHeart weakens

By Stephanie N. Rotondo

Seattle, March 8 – The distressed debt market’s recent rally came to a halt on Tuesday, as investors swooped in to take some profits off the table.

“The whole market was off a little bit,” a trader noted. “Miners were getting hit. Some are saying things rallied too much, too fast.”

The market’s rebound has been led in large part by a rise in commodity prices – specifically oil, which has gained about $10 in the last month.

In a report sent to clients on Tuesday, Goldman Sachs said that oil’s rebound – as well as that of steel and iron – was premature and that the sector needs prices to stay low in order to deal with the current supply glut.

“Energy needs lower prices to maintain financial stress to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating as it did last spring,” the report said.

For its part, domestic crude oil declined nearly 4.5% to $36.26.

As for oil and gas-linked bonds, Whiting Petroleum Corp. was actively traded and weaker, despite assertions from company management that liquidity was ample.

A trader said the 6¼% notes due 2023 fell almost 2 points to 60¾, as the 5% notes due 2019 dipped 1½ points to 64¼.

The 5¾% notes due 2021 lost 2 points, ending at 61, the trader said.

James J. Volker, Whiting’s president and chief executive officer, told attendees of the 37th Annual Raymond James Institutional Investors Conference in Orlando on Tuesday that the company was sitting on $2.7 billion of liquidity – much more than most of its peers. Additionally, the company faces no near term maturities and is compliant with all of its debt covenants.

Meanwhile, Chesapeake Energy Corp. bonds were also sliding downward.

A trader said the 3.872% notes due 2019 declined 1½ points to 30½. The 8% second-lien notes due 2022 fell 2½ points to 51½, he said.

Another trader said the 8% notes were “down a bunch,” falling to 50½ from previous levels around 54.

iHeart gets default notice

iHeartMedia Inc. paper was deemed lower on Tuesday following news that iHeart Communications Inc.’s priority noteholders had served the company with notices of default.

San Antonio-based iHeart, however, is fighting the notice, going so far as to file a lawsuit against the noteholders and the indenture trustee.

A trader saw the 14% notes due 2021 losing “a couple points,” ending “around 23.” The 10% notes due 2018 were off a like amount, he said, closing “around 35.”

The notice of default alleges that a default occurred when iHeart moved certain assets to its Broader Media LLC subsidiary on Dec. 3. The company maintains that it was within its rights to move the assets and that the holders’ allegations have no basis.

iHeart’s lawsuit seeks to put an end to the matter with a declaratory judgment. The company is also seeking preliminary and permanent injunctions in order to protect its rights.

Intelsat rises

Intelsat SA was one name that bucked the day’s downward trend, traders reported.

At one shop, a trader said the 7¼% notes due 2020 inched up a point to 69¾, while the 5½% notes due 2023 improved over 1½ points to 66. The 7¾% notes due 2021 were seen rising almost 2 points to 28¾.

Another trader said the name “rallied a few more points,” pegging the 6¾% notes due 2018 in a 66½ to 67 context, which he deemed up “about 3 points.”

The trader also saw the 6 5/8% notes due 2022 jumping about 6 points to trade “north of 60.”

The second trader said there hasn’t really been anything specific to drive the paper higher, though he noted that the company was seeking to amend its credit facilities, as was previously reported on Feb. 29.

The trader also pointed to the signing of several strategic partnerships the company has done in recent weeks, including a satellite servicing pact with Orbital ATK announced on Tuesday.

© 2015 Prospect News.
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