Distressed market quiet heading into holiday; Arch gains; Peabody eases; Puerto Rico firms

By Paul Deckelman

New York, July 2 – The distressed-debt market saw a quiet session on Thursday ahead of the three-day Independence Day holiday break in the United States.

That holiday pause includes a full shutdown of U.S. fixed-income markets on Friday.

Consequently, trading was light in the high-yield, convertible and municipals market on Thursday, with many market participants making an early exit.

Before they left, however, they took Arch Coal Inc.’s battered bonds up – though only on relatively light volume – on the news that the coal mining company will be doing a pair of private debt exchanges for its existing notes.

The notes of Arch Coal sector peer Peabody Energy Corp., which had fallen by multiple points on Wednesday after the big coal producer revised its previously issued earnings guidance downward, seemed to steady around those lower levels on Thursday.

Iron ore producer Fortescue Metals Group Ltd.’s bonds were lower, hurt by a big drop in the ton price of iron ore.

And Puerto Rico’s bonds were better for a second consecutive session, buoyed by Wednesday’s news that the troubled island U.S. commonwealth had averted a possible default by making a total of $1.9 billion of scheduled July 1 payments on its own general obligation bonds and bank debt as well as on Puerto Rico Electric Power Authority debt.

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