Distressed oil and gas bonds firm despite crude’s modest retreat; Fannie, Freddie active

By Stephanie N. Rotondo

Seattle, May 31 – The distressed debt market was subdued in the final trading session of the month, but the energy sector still managed to post gains.

The sector’s improvement came even as oil prices came in a bit following comments made by Suhail bin Mohammed al-Mazroui, the UAE’s oil minister.

“We are optimistic,” he said of the state of the oil market. “We are seeing that the market is correcting upward.”

Mazroui made the comments to reporters in Vienna, as OPEC members prepare to meet in the Austrian capital on Thursday.

In distressed dealings, a trader said California Resources Corp.’s 8% second-lien notes due 2022 ticked up over half a point to 73, while Comstock Resources Inc.’s 9½% notes due 2020 improved nearly a point to 27.

Another market source said SandRidge Energy Inc.’s 7½% notes due 2021 inched up almost a point to 6¾ bid.

While the oil and gas space was mostly firm for the day, there were a few that did not follow the trend.

For instance, a trader said Continental Resources Inc.’s 3.8% notes due 2020 dipped half a point to 87 1/8. The trader also deemed the issue one of the most active in the distressed space.

The 5% notes due 2022 were meantime seen at 94¾, off half a point as well.

At another shop, Denbury Resources Inc.’s 6 3/8% notes due 2021 were deemed a quarter-point lower at 73¼ bid.

Fannie, Freddie churn higher

There continued to be a fair bit of action in Fannie Mae and Freddie Mac preferreds, even as the day’s broader volume was deemed “incredibly light” by a market source.

One trader said the GSEs’ preferreds were “all jumping up,” as judge Margaret Sweeney of the U.S. Court of Federal Claims has asserted that she wants to review all documents the government has been trying to keep sealed in regards to the Treasury’s “net worth sweep” of the agencies’ profits.

“It could be that she’s finding something disturbing,” one source said. “It could be good for preferred holders.”

While Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up earlier in the day, by the bell they were unchanged at $4.46. Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS), however, ticked up 7 cents, or 1.52%, to $4.68.

In recent weeks, Sweeney has unsealed a number of documents that appear to show that the Treasury and the White House worked together more than previously reported in rationalizing the government’s takeover of a majority of Fannie and Freddie’s profits. Stakeholders – some of which have gone so far as to sue the government, deeming the sweep illegal – have eaten up the new information.

As a result, Fannie and Freddie preferreds have been edging ever higher.

© 2015 Prospect News.
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