Volume stays low in pre-holiday calm; Valeant down; iHeart mixed as decision looms; one-off names trade

By Colin Hanner

Chicago, Dec. 20 – Volume and movement were sluggish in the distressed arena on Tuesday, continuing a three-day trend of similar behavior as equity markets soared to new highs.

The pre-holiday lull has seemingly gone into effect as volume remains low across the distressed market, a trader said.

Valeant Pharmaceuticals International, Inc. continued to move from Monday’s session on a “fair amount of volume” given the current volume trading, a trader said. Movement was down, and there were no evident factors driving movement.

Movement was mixed for iHeartMedia, Inc. as a decision from the International Swaps & Derivatives Association continues to hang over the media company.

In the energy and production sector, oil prices were marginally firmer and lifted oil and oil-related names like Denbury Resources Corp. and Stone Energy Corp., which saw an uptick in its notes.

Yet, oil drillers may have been feeling the effects of news that President Obama permanently banned offshore oil and gas drilling in the Arctic and Atlantic, even if drillers do not have operations there.

Swedish driller Transocean Ltd. was one of the day’s biggest decliners in distressed-land.

Several one-off and not often traded securities traded in all directions and rounded out activity in the distressed space, a trader said.

Valeant down, again

For the second session this week, Valeant Pharmaceuticals accounted for the bulk of the action in the distressed market with several of its distressed notes, which traded down on Tuesday.

There were no apparent drivers of the movement.

A trader said the 6 1/8% notes due 2025 were down ½ point on a “fair amount” of volume to 73½, ¼ point off of where it was down on Monday’s session.

The 5 7/8% notes due 2023 were down ½ point to 74½, a trader said.

Rounding out Valeant were its 7½% notes due 2021, which were down ¾ point to 84, a market source said.

Pharmaceutical company Mallinckrodt Pharmaceuticals plc’s 4¾% notes due 2023 were up 5/8 point to 86½.

iHeart moves in all directions

A ruling looms over the heads of those with a stake in iHeartMedia in regards to the company’s decision to skip the $57.1 million of 5½% senior notes.

The International Swaps & Derivatives Association is deciding whether the skipped payment constitutes a “failure to pay” and whether the non-payment constituted a “restructuring credit agreement,” according to a report from Bloomberg.

The association may decide whether the event is a credit event worthy of $879 million of default insurance.

Its distressed notes teetered around previous trading levels, especially its 10 5/8% notes due 2023, which were “pretty much unchanged” at a 75 3/8 handle, a trader said. He added there were a “dozen” trades for the notes.

The 9% notes due 2019 were up 1/8 point to 80 1/8, a market source said, and the 9% notes due 2021 were down 1/8 point to 73 3/8.

Oil mixed, drillers wary

Since the passage of several accords by members and non-members of the Organization of Petroleum Exporting Countries to cut the global oil supply glut, oil prices have been less prone to the volatility felt just before the completed agreements.

Though the volatility isn’t expected to subside, it firmed on Tuesday, bringing with it several distressed oil names.

Denbury Resources’ 6 3/8% notes due 2021 were up ¾ point to 91, a market source said.

Stone Energy’s 7½% notes due 2022 were also up ¾ point to finish at 57½. Stone filed for Chapter 11 bankruptcy protection last Wednesday.

Oklahoma City-based Continental Resources, Inc.’s 4.9% notes due 2044 were unchanged at 85½, a trader said, adding that Noble Corp. plc’s 8.2% notes due 2045 were unchanged at 83¼ on a “handful of trades.”

On Tuesday, Obama announced that he would use executive powers to ban offshore drilling in parts of the Arctic and the Atlantic, invoking a provision from 1953 Outer Continental Shelf Lands Act that allows presidents to govern which waters are deemed on- and off-limits to drilling.

Though it may not have had a direct impact on Transocean Ltd.’s movement on the day, its 6.8% notes due 2038 were down 2 points to 78 7/8, a trader said.

Mining movers

In the coal space, Peabody Energy Corp.’s 6½% notes due 2020 were down 1½ points to 69, a market source said.

Iron ore miner Cliffs Natural Resources Inc.’s 6½% notes due 2040 were up 1 point to 80½, a trader said.

One-off roundup

Packaging provider Paperworks Industries’ 9½% notes due 2019 were up 2 points to 85, a trader said, adding that the sharp increase was because “maybe they hadn’t traded in a while.”

Pulp and paper manufacturer Resolute Forest Products Inc’s 5 7/8% notes due 2023 were up 1¾ points to 84¼, a market source said.

Endo Finance Co. remained unchanged in its 5 3/8% notes due 2023, which settled with an 85 handle, and its 6½% notes due 2025, which finished at 84¼.

Gold, silver and copper producer Freeport-McMoRan Inc.’s 5.45% notes due 2043 were down ½ point to 82¾.

Offshore supplier Hornbeck Offshore Services, Inc.’s 5% notes due 2021 were up 1 5/8 points to 66¾, a trader said, on “a handful of trades.”

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