Cliffs bonds weaken as iron prices fall; OAS probed in graft investigation, debt declines

By Stephanie N. Rotondo

Phoenix, Nov. 18 – The distressed debt market was weaker Tuesday, though with little news to act as a catalyst.

There were, however, some names that were getting moved around by news. Cliffs Natural Resources Inc. saw its bonds decline as iron ore prices fell to a five-year low. OAS SA – a Brazilian engineering and construction company – meantime saw its debt plummet amid accusations of graft.

Even RadioShack Corp. was deemed softer, though the company was said to have made a coupon payment that came due on Monday.

A trader said the 6¾% notes due 2019 fell 4 points to 38.

Elsewhere, oil and gas exploration and development names remained under pressure as oil prices dropped over 1% on the day.

West Texas Intermediate crude oil fell $1.28, or 1.69%, to $74.36 per barrel. Brent crude dropped 88 cents, or 1.11%, to $78.43 per barrel.

In that space, Paragon Offshore plc’s 6¾% notes due 2022 were seen declining 1½ points to 61½, while the 7¼% notes due 2022 lost 4 points, closing around 62.

Private producer Samson Investments Co. saw its 9¾% notes due 2020 slipping over a point to 69, according to a trader.

And in CGG SA paper, the 6½% notes due 2022 dipped half a point to 82½ and the 6 7/8% notes due 2022 held steady at 83.

CGG provides seismic data services to the oil and gas industry.

Cliffs falls with iron prices

Cliffs Natural Resources’ bonds were softer Tuesday, following a decline in iron ore prices.

A trader saw the 6¼% notes due 2040 a point lower around 60. The 4.8% notes due 2020 lost 1½ points, ending around 66½.

The 4 7/8% notes due 2021 meantime dropped 5 points to 66¾, the trader said.

The company’s equity (NYSE: CLF) fell 64 cents, or 5.9%, to $10.21.

On Monday, benchmark spot iron ore prices fell to $75.10 per ton, the lowest price since June 2009. Additionally, news out Tuesday indicated that China’s home prices had fallen 2.6%, which then weighed on Chinese iron ore and steel futures.

OAS in graft probe

Brazil-based OAS got beat up Tuesday following an investigation into graft among several Brazilian construction companies.

The 8¼% notes due 2019 closed around 60, according to a trader. On Monday, the issue was trading around 82, which compared to 89 on Friday.

Police in Brazil are investigating companies that have allegedly formed a cartel in order to win contracts with state-owned oil producer Petroleo Brasileiro SA. OAS is said to be cooperating with the investigation.

However, Moody’s Investors Service cut its outlook on the company to negative from stable. The rating agency noted that while the investigation is ongoing and no conclusions have been made, the allegations could negatively impact the company’s growth strategy.

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