Peabody Energy sees renewed gains amid tumultuous oil news; CIT trades up; Rent-A-Center debt in retreat

By Colin Hanner and Stephanie N. Rotondo

Chicago, Oct. 11 – Sandwiched between the long Columbus Day weekend and the start of Yom Kippur, distressed debt varied but saw gainers in the energy sector.

Speculation of the Federal Reserve raising interest rates before the end of the year might have affected the trading.

“Coal continues to be one of the more active spaces,” a trader said. “It continues to go higher and higher.”

Peabody Energy Corp. gained 3¼ points on the day. One trader commented that the 10% notes due in 2022 were “up a couple of points, touched as high as 59,” and closed just above 57. The company’s 6% notes due 2018 were up a few points as well, trading around 37.

Murray Energy Corp. 11¼ % notes were “up a few points” to 69, a trader said.

In oil and natural gas exploration firms, California Resources Corp. and Linn Energy LLC, saw increases amid news that Russian Prime Minister Vladimir Putin said Monday that he would support the Organization of the Petroleum Exporting Countries’ proposal to halt oil production to retreat on slumping oil prices. That was dwarfed on Tuesday when Russia’s state-owned Rosneft PJSC said it wouldn’t consider cutting oil output.

Oil slumped from its 15-month high in the process.

California Resources 8% notes due in 2022 were up 3¼ points to 37¼, and Linn Energy’s 7¾ % notes due 2021 were up 1½ points to 27.

The biggest non-energy gainer was CIT Group Inc., whose aircraft leasing business was sold on Thursday for $10 billion. The day’s biggest loser was Rent-A-Center Inc., as the company reported weak preliminary quarterly results.

A trader said he saw most action in the “new issue” flow, particularly in Transocean Ltd., CBS Corp. and Concordia International Corp. and Alliance One International Inc. On Tuesday, Lions Gate Entertainment Corp. offered its eight-year senior notes at par to yield 6¼%.

CIT Group rises

CIT Group debt was ticking higher Tuesday, as investors reacted positively to news of an asset sale.

The 6 5/8% notes due 2022 were up three-quarters of a point to 107, according to a market source.

On Thursday, New York-based CIT Group said it had inked a deal to sell its aircraft leasing business to Chinese-owned Avolon Holdings Ltd. for $10 billion. The sale is part of the bank’s effort to trim down its noncore assets.

The company plans to use proceeds to pay out over $3 billion to shareholders and to shore up its balance sheet.

Rent-A-Center trimmed

Rent-A-Center bonds took a hit Tuesday, after the Plano, Texas-based furniture and electronics rental company reported dismal preliminary third quarter results.

“Rent-A-Center was one of the more active names on poor numbers, they were down a fair amount,” a trader said. The trader said the 6 5/8% notes due 2020 were down about 10 points to 86.

The results showed a 12% decline in same-store sales year over year. The company added that U.S. gross profit as a percentage of total revenue would be flat.

The company attributed the weak figures to a new point-of-sale system, citing “system performance issues and outages that resulted in a larger than expected negative impact on core sales.

“While we expect it to take several quarters to fully recover from the impact to the core portfolio, system performance has improved dramatically and we have started to see early indicators of collections improvement,” Robert D. Davis, chief executive officer, said in a statement.

Vanguard improves

Vanguard Natural Resources LLC’s preferreds were trading up Tuesday, even as domestic crude oil prices retreated 1.2% on the day.

In fact, Vanguard’s preferreds were among the day’s biggest percentage gainers.

The 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) rose $1.60, or 50%, to $4.80. The 7.625% series B cumulative redeemable preferred units (Nadaq: VNRBP) – the most active of the two issues – improved $1.22, or 38.98%, to $4.35.

On Oct. 3, the MLP said that it was skipping a $15 million coupon payment on its senior notes as it waited to see how banks would recalculate its credit facility.

As for oil prices, they came in Tuesday following a 3% gain seen on Monday. The gains were due to comments made by OPEC and Russia regarding the possibility of a production cut agreement.

However, the commodity was pressured come Tuesday on concerns a deal might not appear.

It did not help that the International Energy Administration reported record-high production from OPEC in September.

Indicators mixed

Market indicators were mixed Tuesday, as the equity markets took a 1% to 1.5% decline.

The KDP High Yield index came in at 71.35, with a yield of 5.49%. That compared to Friday’s reading of 71.34, with a 5.47% yield.

As for the Markit Series 27 CDX index, it dipped nearly a quarter-point to 104.05 bid, 104.15 offered.

The stock market was meantime lower as oil prices came in on concerns surrounding a potential production cut deal from OPEC and Russia. Weakness in healthcare and financials also weighed on the market.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.