Peabody bonds lead pack after industrial metals rally; CF downgraded to junk; Intelsat paper fluctuates

By Colin Hanner

Chicago, Oct. 18 – Industrial metal sector upticks and the consumer price index paved the path for several increases in the distressed coal and energy sector during Tuesday’s session.

“Metals and mining were the best performers today,” a market source said.

Australian thermal coal spot prices hit $100 per ton for the first time in four years, and industrial metals surged as $255 billion in Chinese financing exceeded expectations and the dollar weakened for the second-consecutive day.

The consumer-price index increased 0.3% in September, building into an overall 1.5% rise over the last 12 months, per a U.S. Bureau of Labor Statistics release. Higher rents and gasoline prices were the major contributors to rising inflation.

The energy index saw its largest increase since April, growing 2.9%. From August, energy commodities were up 5.5%; gasoline was up 5.8%; fuel oil was up 2.4%; electricity was up 0.7%; and utility (piped) gas service was up 0.8%.

The energy index has declined 2.9% over the past year, the smallest annual decline since October 2014, the report said.

As for the day’s dealings, Peabody Energy Corp.’s 6¼% notes due in 2021 saw “tons of trades,” and were 2½ points better around 37¾ to 38 on the day, according to a market source. The 10% notes due 2022 traded “almost as frequently,” finishing up 1¾ points at 57¼.

Peabody’s stock was one of the day’s biggest gainers and was up nearly 33% at the close at $2.62.

The company may still be riding the momentum of a contract scored last week with Nippon Steel & Sumitomo Metal Corp. The St. Louis-based coal company agreed to sell coking coal at $200 per ton.

California Resources Corp. and Stone Energy Corp. rounded out the energy sector with modest gains.

California Resources’ 8% notes due 2022 were up ¾ to 73½, while Stone Energy’s 7½% notes due 2022 were up 1 point to 59.

Market round up

CF Industries Holdings Inc. was downgraded to junk by S&P Global Ratings on Tuesday and was “pretty active,” a market source said. The 3.8% notes due 2023 were “one of the more active issues” but were still trading around the same level, “around a 94 handle.”

“The lower ratings reflect our view that ongoing depressed pricing in the nitrogen fertilizer sector will weaken credit metrics to levels that are not appropriate at the previous ratings,” S&P said in the statement with the downgrade.

Valeant Pharmaceuticals Inc. 6 1/8% notes due 2025 were down 5/8 point to 82 1/8 on “pretty good volume,” a market source said.

Hovnanian Enterprises, Inc.’s 7% notes due 2019 were up a ½ to 66¾, a market source said.

Intelsat SA’s Jackson-linked 5½% notes due 2023 were up “½ point to 68¾,” a trader said.

The trader went on to comment on the company’s Luxembourg-linked 8 1/8% notes due 2023 were up a point from yesterday, trading at 32½.

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