Energy up on weekend’s supply cut deal; Peabody rallies on benchmark coal contract; J. Crew down

By Colin Hanner

Chicago, Dec. 12 – After a successful oil supply cut accord reached over the weekend, energy bonds had their second revival in the past two weeks, extending gains in the distressed arena on Monday.

Off the heels of a successful supply cut reached between the Organization of Petroleum Exporting Countries and non-members, oil futures were up several points, and bonds followed.

“Oil’s the game today,” one trader said.

California Resources Corp. was up on the news, as was Denbury Resources, Inc. and Linn Energy, LLC, though the gains were stifled by market sentiment that bowed to the impending Federal Reserve meetings on Tuesday and Wednesday that will almost certainly hike interest rates.

A trader said other factors may have pared gains in the afternoon.

In coal, Peabody Energy Corp. rallied several points higher on the news of a coal company reaching a contract that set a benchmark price of $285 a ton for the first quarter of 2017, a price one trader called “a bit bullish.”

After a sharp increase before heading into the weekend due to a possible restructuring in the retailer’s future, J. Crew Group did a reversal on Monday, trading down a few points.

iHeartCommunications, Inc. was weaker on the session, down “a couple of points from recent levels,” a trader said. On Monday, the media company announced it had received consents from some holders of its senior notes.

Supply cut causes upsurge

Oil prices remained hesitant heading into the weekend but emerged on Monday, as non-OPEC oil producers signaled a shift to curb the global supply glut in unison with OPEC members.

Up nearly 5% during the morning session, oil future gains dropped into the afternoon, with some pointing to the hesitation of the market ahead of the Federal Reserve’s meetings on Tuesday and Wednesday, which will most likely bring about a rise in interest rates.

West Texas Intermediate was up 84 cents, or 1.63%, to $52.34 at the close of the market, and Brent crude was up 93 cents, or 1.71%, to $55.29.

“Everybody was bullish on oil coming on in the morning with what was going on with price action,” a trader said. “These things have had such huge runs; I don’t know, maybe some guys were deciding to take some profits and take some bids. It could be dealers pushing things up and then backing up, because there’s no real depth to the bids.”

Nonetheless, distressed energy bonds followed the general trend of upticks during the day.

California Resources’ 8% notes due 2022 were up 1½ points to 91, a trader said, and traded as high as 92. A market source said the notes traded up 2½ points to 91½.

Also finishing with a 91½ handle were Denbury Resources’ 6 3/8% notes due 2021, a 1½-point gain.

Canadian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were up 1 point to 92¾, a market source said.

Linn Energy, LLC’s 7¾% notes due 2021, which settled with a 40 handle, were up ¾ point.

Geoscience company CGG SA was up ½ point in its 6½% notes due 2021, which finished at 45¾, a market source said.

A trader said Noble Holdings International Ltd.’s 6.2% notes due 2040 were up 3 points to 73.

Peabody gains on benchmark

Teck Resources Ltd., a Canadian metals and mining company, announced on Monday that it settled on a benchmark price of $285 per ton for the first quarter of 2017.

Peabody Energy piggybacked off the news of the ever-increasing price of metallurgical coal, which has given way to the St. Louis-based coal company’s rally in the past few months.

Its 6½% notes due 2020 were up 1 point to 75½, a trader said, while its 10% notes due 2022 were up 1 point to 97.

On Friday, Mangrove Partners Master Fund, Ltd. filed a motion in the United States Bankruptcy Court for the Eastern District of Missouri seeking an official committee of equity security holders. Mangrove said Peabody’s reason for declaring bankruptcy was because of “reduced demand and significantly lower coal prices,” which Mangrove claims have rebounded since the filing.

J. Crew gives back

After a report surfaced on Friday that J. Crew will likely be the next brick-and-mortar retailer to enter into a restructuring to deal with its $2 billion debt, its distressed bonds rose dramatically.

On Monday, the notes “gave back a little to the game,” a trader said. Its 7¾% notes due 2019 were down 1 3/8 points to 43½, a trader said.

Another market source said they were still in the 41½ to 42 range.

“There could’ve been a bunch of short covering on Friday,” another trader said, referring to the sharp, heavy-volume increase during the previous session.

iHeart ‘weaker’

On Monday, traders saw most of the activity coming from iHeart’s 10% notes due 2018 and its 14% notes due 2021.

The former were “down as low as 66, but went out better around 67½ to 68,” a trader said, adding the handle was down a couple points from recent levels.

The l4% notes were down ¼ point to 37½, a market source said.

On Monday, iHeart announced it had received consents from holders of $1,286,154,353 principal amount, or 81.5%, of its senior notes due 2021.

The company was seeking to amend the indentures of six series of its notes in order to exclude holders who are neither institutional accredited investors nor non-U.S. persons from any offer to consent, waive or amend the terms of the notes as part of an exchange offer.

After receiving the needed consents for the notes due 2021, the company executed a supplemental indenture to the notes.

iHeartCommunications will pay an aggregate cash payment of $1,729,168 for the fixed fee to consenting holders, which will be allocated in an amount equal to about $1.20 for each $1,000 principal amount, according to a company update.

After a subsequent amendment, the company will pay an aggregate cash payment of $2,593,752 for the contingent fee to consenting holders pro rata, which would be about $1.80 for each $1,000 principal amount.

As for the remaining five series, the company failed to receive the consents from holders representing a majority of each of the priority guarantee notes outstanding.

Mixed bag roundup

Valeant Pharmaceuticals International Inc. inched higher on Monday in its 7½% notes due 2021, which were up ½ point to 86½, a market source said.

A trader said the 6 1/8% notes due 2025 were up ¾ point to 68.

Claire’s Stores Inc.’s 9% notes due 2019 were unchanged with a 50 handle, a trader said.

Susanna Moon contributed to this review

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