Distressed bonds mostly better along with junk market; energy, Chemours, Valeant up, Intelsat off

By Paul Deckelman

New York, July 8 – Bonds of underperforming and distressed companies were seen doing mostly better on Friday.

Market sources said that they were helped by overall strength in the junk bond market, which saw a second straight session of gains, taking its cue from a strengthened equity market reacting to a better-than-expected report on June’s job-creation numbers.

Notable gainers included energy credits such as California Resources Corp., which was helped by a rebound in oil prices after Thursday’s big slide.

The sources also saw gains in the bonds of embattled chemicals maker Chemours Co. despite negative news this week on the legal front in terms of its financial liability from years of alleged chemical dumping by former corporate parent DuPont.

Underachieving drug manufacturer Valeant Pharmaceuticals International Inc.’s paper was also better.

Among the few notable downsiders seen was communications satellite company Intelsat Jackson Holdings SA’s benchmark issue.

Bonds get a boost

Traders said that the distressed and underperforming contingent was better Friday, in line with a generally stronger junk bond market, with one of them opining that it was “up at least ½ point generically – and some of the bigger go-go issues were much better than even that.”

The market was seen to be taking its cue from stocks, which got a big shot in the arm early on when the Labor Department reported that non-farm payrolls in the United States swelled by 287,000 jobs in June – more than 100,000 more than what Wall Street had been expecting.

The figure was also a vast improvement from the anemic 38,000 jobs figure that had been reported a month ago for May.

With the wind from the jobs report in its sails, equities, which had fallen on Thursday amid new fears of weakened international economic growth, shot upwards on Friday. The bellwether Dow Jones Industrial average, which had lost 22.74 points, or 0.13%, on Thursday, its second downturn in three sessions, zoomed by 250.86 points, or 1.40% on Friday, ending at 18,146.74. Other, broader equity indexes experienced similar trajectories.

Energy shows improvement

Against that backdrop, a trader said that “anything energy related had a mini-rally today.”

He saw California Resources’ 6% notes due 2024 up ½ point at 50½ bid.

At another desk, a trader saw those bonds 1 point better, quoting them at 50 bid, 52 offered.

He also saw the Los Angeles-based oil and natural gas exploration and production company’s 8% notes due 2022 firm by 1½ points on the day, ending at 72 bid, with over $13 million traded.

The traders said that the energy credits were getting a boost from a rebound in oil prices. The benchmark U.S. crude grade, West Texas Intermediate for August delivery, rose by 27 cents per barrel, to $45.41, in Friday dealings on the New York Mercantile Exchange – a far cry from Thursday’s $2.29 per barrel slide.

Likewise, the global benchmark grade, Brent crude for September delivery, was up by 36 cents on Friday, settling at $46.76 per barrel on the London ICE Futures Exchange, after having plunged by $2.40 per barrel on Thursday.

Valeant, Chemours move upward

Even bonds of companies recently under pressure were seen having improved on Friday.

For instance, a trader said that Valeant Pharmaceuticals International’s bonds “rose across their structure” on Friday, although he had seen no fresh positive news out on the beleaguered Laval, Que.-based drug manufacturer.

Valeant’s widely held 6 1/8% notes due 2025 rose by 1 7/8 points to 84¼ bid, with over 419 million having traded, while its 5½% notes due 2023 gained 7/8 point to end at 83 3/8 bid, on volume of over $21 million.

Valeant, which recently underwent a management change, has been trying to distance itself from recent troubles that have included official investigations as well as analysts’ statements that its business model – built on numerous acquisitions and large price hikes for acquired drug brands – was unsustainable.

Another name recently in the news in a negative light, Chemours, was also seen better Friday, with its 6 5/8% notes due 2023 at 84 bid, up 4¾ points, with over $16 million traded.

A trader saw the Wilmington, Del.-based chemical company’s 7% notes due 2025 up 4¼ points to 82½ bid.

Chemours, he said, “has really been up and down on a roller coaster this week, but now they’re rebounding.”

Trading has been volatile following the news earlier in the week of a multi-million-dollar judgement against Chemours and its former corporate parent, chemicals giant DuPont, in a suit brought by a former employee who had developed testicular cancer, which he blamed on his exposure to the chemicals DuPont used to make its famous Teflon coating for cookware.

The court held that Chemours, which was spun off from DuPont in 2014, was financially liable under the verdict due to the way its spinoff was structured.

Intelsat loses altitude

Traders said there were not many names standing out to the downside, but one which did drop noticeably was Intelsat Jackson; its benchmark 8% notes due 2024 were seen down some 2¾ points on the day at 94½ bid, a trader said, on volume of over $31 million.

He did not see any fresh negative news out on the Luxembourg-based communications satellite company that would explain the retreat.

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