Energy surges despite crude decline; Murray rebounds; wireline, Sprint, hospitals, retail stronger

By Paul Deckelman

New York, Nov 16 – Distressed debt and bonds of otherwise underperforming companies and sectors were broadly higher on Thursday, in line with a generally stronger high-yield bond market, which itself seemed to be following the lead of a resurgent equity market.

Oil and gas credits like California Resources Corp. and EP Energy Corp. were solidly better even though crude oil prices continued to fall back.

Murray Energy Corp.’s notes rebounded solidly after plunging on Wednesday in response to news that its planned acquisition of a big stake in fellow coal operator Bowie Resource Partners LLC had fallen through.

There was also strength seen in some recently beleaguered sectors, including wireline telecommunications names such as Frontier Communications Corp., CenturyLink, Inc. and the former Level 3 Communications, now a CenturyLink unit.

Wireless provider Sprint Corp. – whose bonds had recently retreated with the demise of its proposed link-up with sector peer T-Mobile (US) Inc. – were on the rebound.

And strength was seen in such recently underperforming sectors as retailing, such as J.C. Penney Co. Inc., and hospital operators like Tenet Healthcare Corp. and Community Health Systems Inc.

New Valeant notes up

A market source said that he saw “a fair amount of activity” in the recent new deal from Valeant Pharmaceuticals International, Inc.

He saw Valeant’s 5½% notes due 2025 ending at 101 3/8 bid, up ¾ point on the day, with about $19 million traded.

The Laval, Que.-based drug manufacturer had priced its regularly scheduled $750 million add-on offering to its existing $1 billion of those 5½% notes at par on Tuesday.

Struggling sectors snap back

A trader said that he had seen “a lot of snap back” in some names and sectors which had recently been under pressure, helped by the overall strength in the junk market, which itself seemed to gain some inspiration from the big stock market surge Thursday, with the bellwether Dow Jones Industrial Average jumping 187 points on the day.

Another trader quoted an old adage in noting that “a rising tide lifts all boats.”

One big gainer on the day was Murray Energy’s 11¼% notes due 2021, which had plunged by 6 or 7 points Wednesday in active trading, hurt by the news that the planned takeover of fellow coal mining concern Bowie Resource Partners LLC by a syndicate led by St. Clairsville, Ohio-based Murray had been scrubbed.

On Thursday, though, those notes rebounded sharply from their Wednesday lows around 45 bid, and ended the day at 52 bid, a gain of more than 6 points, with about $10 million traded.

Elsewhere, a trader said that Frontier Communications’s notes “had really gotten beat up over the past week” – but he saw the Stamford, Conn.-based wireline telecom company’s 11% notes due 2025 up some 2¼ points on the day to 78 bid, with over $49 million traded.

Its 10½% notes due 2022 closed at 80 bid, up 1¼ points on the day, with over $15 million traded.

Monroe, La.-based sector peer CenturyLink’s 7½% notes due 2024 moved up nearly 1 full point on the day to just over 98 bid, with $20 million having changed hands.

Bonds of Level 3 Communications Inc. – now a CenturyLink subsidiary – were also better after some recently rough sledding, with the Broomfield, Colo.-based internet backbone network operator’s 5 3/8% notes due 2022 finishing up ¾ point at 101 bid.

In the wireless category, Overland Park, Kan.-based Sprint’s 7¼% notes due 2021 edged up 1/8 point to 106 1/8 bid, with over $27 million traded, while its 6 7/8% notes due 2028 did much better, climbing 1 5/8 points to 101¾ bid, with over $17 million moving around.

Energy up though crude falls

A trader noted that California Resources’ 8% notes due 2022 “had gotten beaten up the last few days, with WTI [West Texas Intermediate crude oil prices] off.”

But he said that the Los Angeles-based exploration and production company’s benchmark issue had firmed by 1½ points on Thursday to close at 71¼ bid, on volume of over $40 million.

Houston-based sector peer EP Energy’s 9 3/8% notes due 2020 were up by around the same amount, ending at just under 76½ bid, with around $13 million of volume.

While the energy names gained, crude continued to struggle Thursday, with West Texas Intermediate off 19 cents a barrel on the New York Mercantile Exchange – its third straight loss – settling at $55.14.

North Sea Brent crude was down for a fifth straight session in London futures trading, ending off 51 cents per barrel at $61.36.

Hospitals, retail rebound

Traders said the hospital names – recently under pressure amid investor fears regarding possible healthcare law changes – were more robust on Thursday, with Franklin, Tenn.-based Community Health Systems’ 8% notes due 2019 up ¾ point on the day at 91¾ bid.

Dallas-based Tenet Healthcare’s 6¾% notes due 2023 were up 1 full point on the day at 93¼ bid.

In the retailing space, Plano, Texas-based department store operator J.C. Penney’s 5.65% notes due 2020 surged by more than 3 points on the day to end at 91½ bid, on volume of over $12 million.

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