AK Steel dips ahead of earnings; Peabody downgraded; Alpha Natural ‘whacked’; Toys drops

By Stephanie N. Rotondo

Phoenix, July 27 – The distressed debt market continued its downward spiral Monday, with commodities leading the way.

AK Steel Holding Corp.’s bonds “continued to be under pressure,” a trader said. Weak commodity prices and slower growth in China have weighed on the name in recent days.

The declines came ahead of the company’s earnings release on Tuesday. Analysts are predicting a loss per share of 27 cents on revenue of $1.72 billion.

In the same quarter of 2014, the loss per share was 40 cents and revenue was up over 26%. In the first quarter of 2015, the loss per share came to 28 cents, with revenue of $1.75 billion.

Among other metal mining companies, iron ore producer FMG Resources saw its debt continue to weaken as well.

In the coal arena, Peabody Energy Corp. paper was “a little bit weaker,” according to a trader.

Sector peer Alpha Natural Resources Inc. was also losing ground during the session as speculation grows that the company may soon find itself in bankruptcy court.

“Those keep getting whacked,” a trader said the 7½% second-lien notes due 2020.

Toys “R” Us Inc. bonds were also losing ground in Monday trading, after it was reported that some insurance providers were cutting back on their coverage to the Wayne, N.J.-based retailer’s suppliers.

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