Diamond Offshore bonds climb; energy names improve; Hertz, Frontier Communications gain

By Cristal Cody

Tupelo, Miss., Jan. 8 – Distressed energy bonds mostly improved in step with oil prices over Friday’s session.

Diamond Offshore Drilling Inc.’s 4 7/8% notes due 2043 rose more than 1 point on the day to 16 bid, a market source said.

The company’s 3.45% notes due 2023 also were trading at 16 bid on Friday.

“A lot of names in energy are up today,” the source said. “Diamond Offshore’s bonds – last month, they were in the low teens, so they’re moving higher.”

Houston-based oil and gas drilling contractor Nabors Industries Ltd.’s senior notes also were better on the day.

Nabors’ 5¾% notes due 2025 (Caa2/CCC-) headed up 1¼ points in afternoon trading to 60 bid.

North Sea Brent March crude oil futures added $1.61 to settle at $55.99 a barrel on Friday.

West Texas intermediate crude oil for February deliveries rose $1.41 to $52.24 a barrel.

Also on Friday, Chesapeake Energy Corp.’s 8% notes due 2027 added ½ point to 5½ bid in trading, a market source said.

As part of the company’s Chapter 11 bankruptcy case filed on June 28, documents on Thursday included a notice of the new directors and officers of what will be the reorganized Chesapeake Energy.

Chesapeake plans to eliminate about $7 billion of debt under the reorganization.

The bankruptcy hearing before the U.S. Bankruptcy Court for the Southern District of Texas continued on Friday.

Markets eyed

While fall-out continues following Wednesday’s siege on the U.S. Capitol by supporters of president Donald Trump and the death total has risen to five, the financial markets have mostly shrugged off the political turmoil with president-elect Joe Biden’s inauguration on the horizon, sources report.

“There is a transfer of power and the new government is going to spend more money,” a source noted.

Late Friday, Twitter announced it had permanently banned Trump from its platform due to the “risk of further incitement of violence” as Democrats seek an impeachment.

Meanwhile, bond issuers are decreasing their debt exposure.

“There is a lot of cash and everybody is just buying anything they can get their hands on,” the source said. “To the extent a company can issue debt, they can decrease their financial risk because they will be retiring the short-term maturities.”

The S&P U.S. High Yield Corporate Distressed Bond index rose 0.61% on Thursday with a month- and year-to-date total return of 2.25%.

In economic data released Friday, the Labor Department reported total nonfarm payroll employment fell by 140,000 in December, while the unemployment rate was flat at 6.7%.

December job losses in leisure and hospitality and in private education were partially offset by gains in professional and business services, retail trade and construction, according to the release.

Stocks continued to rise on Friday after strong gains Thursday. The S&P 500 increased 0.55%, while the Nasdaq improved 1.03%.

The iShares iBoxx High Yield Corporate Bond ETF headed out up 13 cents at 87.37 after gaining a quarter on Thursday.

Hertz, Frontier improve

In other distressed trading on Friday, car rental operator Hertz Corp.’s 5½% senior notes due 2024 recovered 1 point to 53¾ bid after trading mid-week down 2¾ points, a source said.

Elsewhere, AMC Entertainment Holdings, Inc.’s bonds were up in light trading during the session, a source said.

The theater owner’s 10½% first-lien secured notes due 2025 (Caa2/CCC) pushed up 3 points to 82 bid after trading 6 points higher on Thursday.

Also Friday, Frontier Communications Corp.’s distressed 7 5/8% notes due 2024 improved ¾ point to 53¾ bid, a market source said.

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