Distressed quiet before holiday; Intelsat better; supermarkets end week on the rebound

By Paul Deckelman

New York, Sept.1 – The market for bonds of distressed or underperforming companies was quiet on Friday, traders said, in line with a general lack of activity in the larger junk bond market ahead of the upcoming Labor Day holiday break in the United States.

Traders saw relatively robust volume for so quiet a day in the bonds of communications satellite company Intelsat SA, with those notes heard to have pushed higher.

The traders said that supermarket names such as Albertsons Cos. LLC and SuperValu Inc. were a little firmer on Friday, though on not much volume, and the sector overall, including credits such as Fresh Market Inc., was closing out the week above the lows hit early in the week on the news that retailing giant Amazon.com, the new owner of sector peer Whole Foods Markets, had ordered widespread price cuts at the unit, sparking fears of a potentially destructive price war.

Murray Energy Corp. was also seen closing out the week higher than its recent levels, a trader said.

Overall market slow

A trader in distressed bonds said that “there was nothing really going on at all.

“People came in, they heard the August jobs numbers [156,000 new non-farm payroll positions created during the month – less than Wall Street expectations of 180,000 jobs] – and then they left to start their Labor Day weekend,” he said.

Another trader pointed out a similar lack of volume and real activity in the overall high-yield bond market, opining that there was “not much volume, things were totally dead.” He estimated total junk market turnover at only about $600 million, versus about $1.5 billion on Thursday, well down from the average daily range of between $2 billion and $4 billion.

Intelsat gains altitude

A trader said that Luxembourg-based communications satellite company Intelsat “was better yesterday [Thursday] – and they’re holding their gains today.”

He saw the company’s Intelsat Jackson Holdings SA 9¾% notes due 2025 “about unchanged” at 102 bid, adding that “it feels like there are still better buyers around for it.”

A second trader said that those bonds were up by around ½ point, pegging them at just over 102½ bid, on volume of $9 million – a relatively robust volume figure on such a sleepy day.

And a market source at another desk said that Intelsat Jackson’s 7¼% notes due 2020 firmed by ¼ point to 95¾ bid.

Murray Energy coming back

A trader said that the normally well-traded energy sector was little changed on the session. For instance, he said that Los Angeles-based oil and natural gas exploration and production operator California Resources Corp.’s 8% notes due 2022, considered a benchmark issue for the energy credits, “was about untraded today.”

Elsewhere among energy names, he said that Murray Energy’s 11¼% notes due 2021 “have been under pressure lately – but they may be stabilizing and turning the corner” after having gotten badly beaten up over the last two weeks or so.

He saw those notes trading in a 58 to 58¼ bid range versus Thursday’s trades in the 57 bid area,.

The St. Clairesville, Ohio-based coal mining company’s bonds have fallen to their current levels from prior levels in the upper 60s on a combination of factors, including poor earnings as well as a U.S. Energy Department decision to not issue an emergency order allowing key Murray customer, the power plant operator FirstEnergy Solutions, to keep its coal-fired plants up and running despite federal environmental regulations as the power company faces financial problems.

Food stores up from lows

Traders on Friday said they were not seeing much on the way of trading in bonds of supermarket companies such as Fresh Market which have recently been under pressure – but they said the supermarket names were ending the week up from their recent lows.

A trader said that Fresh Market’s 9¾% notes due 2023 saw “only a little bit trading,” quoting the bonds at around the 76 bid level.

But a market source at another desk, while seeing no real action in those notes, said that the bonds had gone home late Thursday at 77½ bid, which was improved from their recent lows.

Fresh Market and such sector peers as SuperValu, Albertsons and Ingles Markets had fallen last week and then resumed their erosion earlier this week, coming under pressure last week ahead of the scheduled Aug. 28 closing of internet retailing giant Amazon.com’s acquisition of Whole Foods Markets, an upscale-oriented food store chain known for its organic foods and other boutique products.

Upon the closing, Amazon announced that it was slashing prices on many Whole Foods products, some by as much as 43% – raising the specter of a ruinous price war pitting established chains such as Whole Foods direct competitor Fresh Market and the others against their now deep-pocketed rival in what was already a low-margin industry.

Fresh Market’s 9¾% notes due 2023, now trading in the upper 70s, had been trading around 83 at the middle of last week, then plunged to 76 bid by Monday, while Albertsons’ 6 5/8% notes due 2024 went from around 99½ bid last week to around 96 by Monday. Ingles and SuperValu followed similar trajectories.

But traders said that around mid-week, the selling had pretty much run its course and the grocers began to cautiously creep back up from their recent lows, with Ingles having pushed back up to around par from 98 earlier, SuperValu’s 6¾% notes due 2021 had pushed back up to nearly 99 bid from 98-handle trading earlier in the week.

© 2015 Prospect News.
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