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Distressed oil names in focus as wildfires, Saudi news pressure crude prices; AK Steel remains weak
By Stephanie N. Rotondo
Seattle, May 9 – Distressed debt investors were focusing on commodity-linked paper on Monday and little else.
“There was not a lot of stuff that was trading much at all,” a trader said.
One outlier was Chesapeake Energy Corp., which saw its bonds declining as domestic crude prices came in.
A trader said the 8% second-lien notes due 2022 “traded a bunch,” falling to a 63 to 64 zip code from previous levels around 66.
“I think they were all weaker,” he said of the company’s debt. He also noted that the stock was “getting beat up.”
The equity (NYSE: CHK) dropped 49 cents, or 10.68%, to $4.10.
At another desk, a market source placed Chesapeake’s 6 5/8% notes due 2020 at 56 bid, down over 2 points for the day.
Among other oil-related names, Weatherford International plc’s 5 1/8% notes due 2020 “finally stabilized” after getting “slaughtered” late last week, a trader said.
He said the notes were “straddling” 77.
The name started to get hit on Thursday, falling 5 to 8 points in response to disappointing quarterly results. The paper then dropped another half a dozen points in Friday trading.
For its part, crude oil ended off nearly 3% for the day, as wildfires in Canada threatened the country’s tar sands projects. News of a government shake-up in Saudi Arabia over the weekend – including the installment of a new oil minister, Khalid al-Falih – was also being blamed for oil’s declines.
Elsewhere in the commodity realm, a trader said AK Steel Holdings Corp. “continued to weaken.”
He saw the 8 3/8% notes due 2022 sliding to “around 70,” which he said “seems to be down probably a couple more points.”
Another source pegged the 7 5/8% notes due 2020 at 75¼ bid, a loss of 1½ points.
FMG Resources Ltd.’s 6 7/8% notes due 2022 were also deemed weaker, as a trader called the issue a point lower around 88.
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