Distressed bonds lower ahead of Brexit vote; Advanced Micro rises; oil and gas-linked debt ticks higher

By Stephanie N. Rotondo

Seattle, June 22 – The distressed debt market was trading lower Wednesday, though amid muted trading, according to market sources.

“I think the market is just trying to get past this Brexit vote,” one trader said.

He was referring to the United Kingdom’s vote on Thursday on whether or not to stay in the European Union. The vote has caused some volatility in the markets, as opinion polls appear to show the outcome as nearly 50/50.

While the market did end with a weaker tone for the midweek session, the day’s notable distressed names were mostly moving higher.

A trader said Advanced Micro Devices debt, for instance, “continued to rally.” There hasn’t been any fresh news out on the computer chip maker to explain the rebound, however.

Oil and gas names were also trending up. For its part, domestic crude ticked up a touch to $48.95, despite fears of the upcoming Brexit vote and a smaller-than-expected drawdown of U.S. stockpiles.

The U.S. Energy Information Administration said Wednesday that crude inventories dipped 917,000 barrels last week, less than the 1.7 million-barrel draw analysts polled by Reuters had expected.

Still, California Resources Corp.’s 8% second-lien notes due 2022 edged up “a little bit” to 72, a trader said. Another market source called Denbury Resources Inc.’s 6 3/8% notes due 2021 a point better at 70½ bid.

Elsewhere in the commodity space, a trader said AK Steel Holdings Corp.’s bonds were “pretty much unchanged” following the company’s late Tuesday announcement regarding price increases.

“I think they have stalled out at these higher levels,” he said, given that the debt is trading in the low-90s.

A second source said the 7 5/8% notes due 2020 came in 1½ points to 92½ bid.

The West Chester, Ohio-based steel maker said Tuesday that prices for its specialty sheet and strip stainless steel products would increase by 3% to 6%, effective July 5.

Advanced Micro climbs up

Advanced Micro bonds have been on the rise of late, according to a trader.

That rally continued into Wednesday trading, as the trader saw the 7% notes due 2024 moving up to 86 from levels around 84 just a couple days ago. He also saw the 6¾% notes due 2019 “up another point,” trading at 97.

At another desk, the 7½% notes due 2022 were seen up nearly 2 points at 89½.

The Sunnyvale, Calif.-based company’s bonds have slowly been climbing upward since early June, when pricing on a new virtual reality graphics chip was announced. The chip is being sold for $199, well below comparable products that go for $399. But the cheaper pricing is part of the company’s strategy to entice customers who are complaining that virtual reality equipment is still too expensive.

Such a move is part of Advanced Micro’s plan to once again see an operating profit in the second half of the year.

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