Energy sees modest moves as oil slumps; Valeant active without much movement; non-actives trade again

By Colin Hanner

Chicago, Oct. 20 – After Wednesday’s voluminous gains in the energy sector, distressed debt took a respite from the action on Thursday after housing reports and unemployment initial claims set off a series of downturns.

“It was another dismal day in the trenches,” said one trader.

“Volume wasn’t very high,” in distressed debt trading, a market source said, and it was the “new deals that dominated in regular high yield today.”

The unemployment initial claims for the week ending Oct. 15 rose 13,000 to 260,000. Numbers falling below the 300,000 threshold signal a strong labor market.

Following a 0.2% decline in August, the Conference Board Leading Economic index reversed course and rose 0.2% in September. The index is meant to encompass turning points in economic data by factoring 10 components of U.S. economic data, including stock prices and the interest rate spread.

“The U.S. LEI increased in September, reversing its August decline, which together with the pickup in the six-month growth rate suggests that the economy should continue expanding at a moderate pace through early 2017,” Ataman Ozyildirim, director of business cycles and growth research at the Conference Board, said in the report.

The National Association of Realtors released figures for existing home sales on Thursday. There were 5.47 million completed transactions in total existing homes sales in September, up 3.2% from the month previous and 0.6% more than a year ago.

“The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” Lawrence Yun, National Association of Realtors chief economist, said in the report.

These reports coupled to increase the price of the greenback, which rose against other currencies in afternoon trading. That had resounding effects on equities and oil prices, which fell from Wednesday when they had reached their highest price in 15 months.

WTI crude was down 1.17, or 2.27%, to 50.43 at close. Brent crude was down 1.30, or 2.47%, to 51.37.

Stable energy

Peabody Energy Corp. saw some movement in the day’s trading, with a trader calling activity “not as active” and “a smidge softer” than it has been in the weeks past.

One market source said the 6¼% notes due 2021 traded down ½ to 42½. The 10% notes due 2022 were up a point to 64½, and the 6% notes due 2018 were up ¼ to 43¼.

Chesapeake Energy Corp. conducted its first analyst day in two years on Thursday, and the market responded favorably, even as the company projected flat 3% growth in 2016 and 5% flat growth in 2017, per their investor presentation. The Oklahoma City, Oklahoma-based oil and natural gas exploration and production company’s stock was up 0.19, or 2.83%, to 6.91.

The company’s 4 7/8% notes due 2022 traded up ¼ to 87, a trader said.

Its 5 3/8% due 2021 were up 2¼ to 90¼.

Murray Energy Corp. “remained fairly active,” a market source said, and its 11¼% notes due 2021 were trading “around 73.” One trader said the notes “traded up 1 point.”

California Resources Corp.’s 8% due 2022 traded down ¾ to 74½, a trader said.

The Overland Park, Kan.-based propane supplier Ferrellgas Partners, LP saw gains in its 6¾% notes due 2022, which were up ¾ to 94¾.

Linn Energy’s 7¾% notes due 2021 were up ¼ to 28¼.

Broad market rundown

Valeant Pharmaceuticals International was “the most active in the distressed area,” a market source said. The company’s 6 1/8% notes due 2025 traded 83½, down 1/8 of a point.

A “fair amount” of trades came through for Avaya Inc., but its 10½% notes due 2021 were “unchanged” on the day.

iHeartCommunications Inc. saw modest moves in both directions on the day. A market source pointed to the 10 5/8% notes due 2023, which were down 1/8 to 74½, and the 9% notes due 2019, which traded down ¼ to 78¾ on a “handful of trades.”

Intelsat Corp.’s Jackson-linked 7½% notes due 2021 traded down ½ to 76 ¾, a market source said. They were at a 77¼ after Wednesday’s session.

Active once again

The Warrendale, Pa.-based fashion retailer Rue21, Inc., which “doesn’t trade often,” a market source said, saw a downturn in its 9% notes due 2021. A trader said the coupons were down 2½ to 26½.

Alliance One International’s 9 7/8% notes due 2021 were trading around an “83 ½ to 84 handle” after “not trading for the past couple of days” and hovering around an “82 handle,” a trader said.

A market source said that Rent-A-Center Inc. 4¾% notes due 2021 were “up ¾ to 80¾.”

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