Little movement stirred by charges against Valeant execs; Peabody reacts to China coal expansion; oil mixed

By Colin Hanner

Chicago, Nov. 17 – Several distressed names rode Wednesday’s momentum into Thursday, the coal space was shaken with news out of China and oil news stirred some names in both directions during the day’s trading.

Valeant Pharmaceuticals International Inc. was one of the more recognizable names in market news on Thursday after two former executives were charged with a variety of counts, including wire fraud and conspiracy to launder money. The company’s notes did not take shocks as some traders had expected.

In energy, the coal sector may have been brought down a peg to news out of China reacting to surging coal prices and a major miner expressing that iron ore and coking coal would cool down after its revival in 2016.

Peabody Energy Corp. and Murray Energy Corp. took a dive in several bonds.

Oil fluctuated on Thursday, with a rise in the morning due to a stabilizing tone in Organization of Petroleum Exporting Countries’ sentiment toward supply cut talks at the end of the month. Oil fell after Federal Reserve Chair Janet Yellen signaled interest rates hike would occur soon, prompting a rise in the dollar and a selloff of commodities.

California Resources Corp. saw a rise in two of its distressed bonds, while EP Energy Corp. traded down after modest gains on Wednesday.

Community Health Systems Inc. continued to see some positive movement, along with several other high-yield hospital groups, and Intelsat SA climbed higher.

Insult to injury

On Thursday, one former executive of Valeant and a former executive of Philidor Rx Services LLC were charged in a Manhattan federal court.

Charges, including wire fraud and conspiracy to launder money, stem from accusations that Gary Tanner, the Valeant executive, and Andrew Davenport, former chief executive officer of Philidor, worked in secret toward securing a purchase option agreement between the two pharmaceutical companies.

The Federal Bureau of Investigation is also looking into possible wrongdoing by two former Valeant executives, Michael Pearson and Howard Schiller, which are separate from the charges brought forward on Thursday.

Valeant’s stock was down as much as 5% in early morning trading but rebounded to $17.98, up 12 cents, or 0.67%, on the day.

Three of its notes went two different directions, and another remained unchanged on the day, according to a market source.

A trader said the 6 3/8% notes due 2020 were down 1/8 point to 86 7/8, while the 5 7/8% notes due 2023 were up ¼ point to 78½.

The 5 3/8% notes were unchanged at 87.

Coal down

After traders said that coal sector seemed to quiet on Wednesday, coal companies inched into declining territory on Thursday, spurred by China’s decision to increase output and one major coal company telling the press that coal would finally start to cool after huge gains in the past year.

In an effort to curb soaring coal prices, China adopted new rules to extend coal mining operation to 330 days per year from 276 days, according to a report from Reuters.

In response to the restructure, the world’s largest miner, BHP Billion Ltd., said it expects coking coal and iron ore prices to cool after wild gains in 2016, a Bloomberg report said.

Peabody Energy Corp. 6½% notes due 2020 were down 4 points at close to 56, and were as low as 54 during intraday trading, a market source said. Another market source said the notes were down 4½ points to 57.

The 6¼% notes due 2021 experienced a similar downturn, declining 3¼ points to 56½, a trader said.

The 10% notes due 2022 down ½ point to 83½, a market source said.

A trader said Murray Energy Corp.’s 11¼% notes due 2021 traded down ¾ point to 75.

Hot, then cold oil

Oil surged early in the day from the momentum of closed-door discussions between OPEC countries but soured after Federal Reserve Chair Janet Yellen said the rise of interest rates would be “appropriate relatively soon.”

The greenback rose against other currencies, and, thus, commodities declined.

Western Texas Intermediate was down 64 cents, or 1.40%, to $44.93 at close.

Brent crude was down 65 cents, or 1.39%, to $45.98, at close.

After announcing a $500 million offering of seven-year senior secured notes that was set to price Thursday, several of EP Energy’s distressed bonds climbed on Wednesday.

Yet, it saw a reverse trend on Thursday, especially in the 6 3/8% notes due 2023, which were down almost a full point to 66 5/8, a market source said.

The 9 3/8% notes due 2020 were down ¼ point to 79, a trader said.

On the rise was California Resources Corp., whose 5% notes due 2020 were up 1 point to 65½.

The company’s 8% notes due 2022 up ¾ point to 72 ¾, a trader said, while a market source said the same notes were up 1 point to 72.

MEG Energy Corp. saw a 1¼-point increase in its 7% notes due 2024, which settled around an 84 handle, a market source said.

CGG SA saw a ¾-point increase in its 6½% notes due 2021, which finished at 43¼, according to a market source.

Denbury Resources Corp.’s 6 3/8% notes due 2023 were up ½ point to 81, a market source said, and rounding out oil was Stone Energy Corp., which gained a ½ point in its 7½% notes due 2022, which settled at 57½.

Round up

Community Health’s 6 7/8% notes due 2022 were up ¾ point to 70, and its 5 1/8% notes due 2021 were up ¾ point to 91¼, a market source said.

Avaya Inc.’s 7% notes due 2019 were up ¼ point to 81, a trader said.

iHeartMedia’s 9% notes due 2021 were down ¼ point to 71½, and its 11¼% notes due 2021 remained unchanged at 74¾.

Intelsat’s Luxembourg-linked 6¾% notes due 2018 were up ¼ point to 72¼, a trader said.

A market source said Alliance One International Inc.’s 9 7/8% notes due 2021 were up ¾ point to 83½.

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