Oil and gas names see more upside follow-through; steel debt ticks higher; Affinion off on earnings

By Stephanie N. Rotondo

Seattle, March 3 – The “rally continued” in the distressed debt market on Thursday, according to one sellside source.

However, another sellsider said the space “kind of took a breather today,” in terms of liquidity.

Crude oil’s recent rebound continued to boost the struggling oil and gas sector, even as crude’s gains lightened up a little.

“It’s a follow-through,” a trader said of the sector’s improvement. “But oil really wasn’t up that much, it was kind of flat-ish.”

Still, anything oil and gas-linked fared pretty well on the day.

A trader said California Resources Corp.’s 8% second-lien notes due 2022 rose over a point to end at 37½. Another trader said the issue did even better than that, rising from 37 on Wednesday to 39 on Thursday.

Whiting Petroleum Corp. was an actively traded name during the session, according to one trader. He saw the 6½% notes due 2018 closing up 2½ points to 42½, the 6¼% notes due 2023 up a deuce at 51¼ and the 5¾% notes due 2022 up almost 2 points to 52.

Murphy Oil Corp.’s 4% notes due 2022 firmed up over 3 points at 68¼, as Oasis Petroleum Inc.’s 6 7/8% notes due 2022 rose 2½ points to 72½.

Steel remains strong

Elsewhere in commodities, a trader said it “seemed like steel names continued to rise.”

He saw United States Steel Corp.’s 7 3/8% notes due 2020 gaining “another 3 points” to close at 70.

Another market source pegged AK Steel Holdings Corp.’s 7 5/8% notes due 2020 at 64¾ bid, up half a point.

The steel sector got a boost on Wednesday, as the U.S. Commerce Department issued preliminary findings that showed companies from seven different countries had violated an anti-dumping law on cold rolled flat steel.

Based on the information produced by the International Trade Administration, the Commerce Department is calling on the U.S. Customs and Border Protection Agency to “require cash deposits” on cold rolled steel from Brazil, China, India, Japan, Korea, Russia and the United Kingdom.

Certain exporters from China, Japan and Russia could also be faced with retroactive duties.

Affinion soft post-numbers

In earnings news, Affinion Group Holdings Inc.’s 7 7/8% notes due 2018 were deemed weaker after the Stamford, Conn.-based marketing company reported its latest quarterly results.

A trader saw the issue falling 3 points to 55.

For the fourth quarter, net revenue declined 10.6% to $281.2 million. The company attributed the drop primarily to an expected decline in membership revenue.

Adjusted EBITDA was $72.5 million, compared to $82 million the year before.

For all of 2015, net revenue fell 5.9% to $1.17 billion. That decline was attributed to membership revenue losses as well as a drop in international revenue, mostly because of unfavorable foreign currency exchange rates.

Adjusted EBITDA for the year came to $268.5 million, a loss of 4.7% year over year.

Fannie, Freddie up on ruling

Fannie Mae and Freddie Mac preferreds were inching higher on Thursday as investors weighed Wednesday’s ruling from the Ninth Circuit Court of Appeals.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 6 cents, or 1.91% to $3.20, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) improved 8 cents, or 2.52%, to $3.25.

On Wednesday, the Ninth Circuit Court upheld a previous district court ruling that deemed the GSEs as private companies. The ruling could have huge implications, as it calls the government’s net worth sweep provision into question.

“Our prior decision in Rust v. Johnson, 597 F.2d 174 (1979), where we held that Fannie Mae was a federal instrumentality for state/city tax purposes, does not change the result, because Rust does not address Fannie Mae or Freddie Mac’s status under the False Claims Act,” the court said in its decision. “As we have previously held, just because an entity is considered a federal instrumentality for one purpose does not mean that the same entity is a federal instrumentality for another purpose... Nor does the Federal Housing Finance Agency’s conservatorship transform Fannie Mae and Freddie Mac into federal instrumentalities.”

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