Distressed commodity names pressured amid broader market sell-off; iHeart paper remains weak

By Stephanie N. Rotondo

Phoenix, Sept. 22 – As the broader markets sold off Tuesday, so did the distressed debt market.

Commodity-linked names in particular got pushed down amid weakening materials prices. For its part, domestic crude oil dropped 1.47% on the day. That weakness came as the Wall Street Journal said a poll of 13 investment banks placed the 2016 average price per barrel at $54.40, down $9 from a poll done in August.

“Commodities were down all across the board,” one trader said.

Another sector getting shocked was telecommunications. iHeart Media Inc. bonds were driven down again, though there was no news to cause the decline.

Commodity bonds driven down

Commodity prices were under pressure Tuesday across the board. In turn, bonds related to anything to do with commodities were getting hit.

With oil prices down 1.47% – prices were down well over 2% earlier in the session – oil and gas names were getting squashed.

Consol Energy Inc.’s 5 7/8% notes due 2022 were seen off 1½ points at 70, according to one trader. Another market source pegged the company’s 8% notes due 2023 at 74½ bid, off 4 points.

California Resources Corp.’s 6% notes due 2024 were also lower, dipping over half a point to 64.

In emerging market names, Pacific Exploration and Production Corp. – more commonly known as Pacific Rubiales – was again weaker, with a trader seeing the 5 5/8% notes due 2025 declining “6 and change” points to 35½.

There has been no credit-specific news to cause such a huge drop, though worries about the state of the global economy have caused such names to wane of late.

In the coal arena, Peabody Energy Corp. bonds were quite heavy.

A trader said the 6¼% notes due 2021 declined 2¾ points to 21¾, as the 6% notes due 2018 fell 3½ points to 29½.

A second source called the 6½% notes due 2020 off over 2 points at 22¼ bid.

“Steels were lower too,” a trader said, due in part to dwindling prices and in part to a recent report that showed production capacity utilization rates were down 3.6% year over year.

U.S. Steel Corp.’s 7 3/8% notes due 2020 ended 3 points weaker at 83¼, the trader said, while the 7% notes due 2018 weakened over 2 points to 94¾.

In AK Steel Holdings Corp. paper, the trader said the 7 5/8% notes due 2020 dropped over 2 points to 56, as the 7 5/8% notes due 2021 declined over 3 points to 55.

At another desk, U.S. Steel’s 2018 bonds were seen off 2¾ points at 94¾ bid. AK Steel’s 2020 maturity were deemed down over 2 points at 58½ bid.

Telecoms tank

The telecommunications space also did not weather the day’s storm all that well and iHeart Media debt continued to lose ground, despite any credit-specific news.

A trader said the 14% notes due 2021 were down “another 3 points” at 44½. The 10% notes due 2018 slipped over 1½ points to 60.

iHeart is a San Antonio-based multimedia company.

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