Distressed bonds rage upward; energy names rise despite oil drop; Nortel holders to get interest

By Stephanie N. Rotondo

Phoenix, Dec. 18 – The distressed debt market continued to climb higher Thursday, as investors continued to react positively to the latest Federal Reserve policy statement.

After its monthly two-day meeting concluded on Wednesday, the central bank announced that it had changed language in regard to when it would raise rates. It switched “considerable time” to “patient,” leaving some to speculate that rates could rise sooner than expected.

In a press conference following the release, Janet Yellen, Fed chairman, said the language change was consistent with the previous policy and that there would likely be no overtures to increase rates for at least a few more meetings.

“A lot of things popped,” a trader said. “A lot of [names] that were beaten down rallied a few points.

“It was a pretty good relief rally for most credits,” he continued. “We’ll see if it sticks.”

After the Fed released its announcement on Wednesday, oil prices rebounded some. However, the commodity came back in during Thursday trading, though it was initially higher in early trades.

West Texas Intermediate crude fell $1.78, or 3.15%, to $54.69 per barrel. Brent crude dropped $1.65, or 2.7%, to $59.53.

Still, energy names remained firm.

A market source saw Linn Energy LLC’s 7¾% notes due 2021 jumping over 6 points to 83 bid. SandRidge Energy LLC’s 7½% notes due 2021 meantime rose almost 5 points to 65¼ bid.

Even names that just had a link to oil were on the rise, according to a trader.

The trader said Hexion’s 8 7/8% notes due 2018 got as good as 90 before settling back into an 87 to 88 context.

The paper had previously been trading around 84, he said.

Away from oil and related names, there were also signs of strength.

iHeart Communications Inc. – a highly liquid name that tends to trade in line with the overall market – saw its 10% notes due 2018 gain 4 to 5 points, closing in an 85 to 86 zip code, a trader said.

The 14% notes due 2021 then hit a high of 84, though they were seen going out around 82.

“That’s still up a couple points on the day,” the trader said.

Nortel notes rise

Nortel Networks Corp.’s U.S. bondholders won the right to receive $1 billion in interest payments, according to a court ruling issued Thursday.

The news “gave the bonds a boost,” a trader said, seeing the 10¾% notes due 2016 moving “up a couple [points]” to trade with a 113 handle.

Despite the Canadian telecommunications company’s objections, U.S. bankruptcy Court judge Kevin Gross approved a deal that would give debtholders of the company’s U.S. unit $1 billion in interest on the about $4 billion of debt they hold.

The bondholders called the deal a compromise on their claims, which would have given them up to $1.6 billion in interest.

Nortel is still looking to the courts to decide how to divvy up over $7.3 billion in the company’s liquidation.

© 2015 Prospect News.
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