Bombardier bonds take flight; Fannie, Freddie preferreds gaining ground; Peabody softens

By Stephanie N. Rotondo

Seattle, April 13 – Distressed bonds were edging higher Wednesday, following the equity tape upward as financials surged.

Bombardier Inc. paper, for instance, continued to firm up in midweek trading as investors reacted positively to recent news of more orders for the company’s struggling C Series aircraft.

On Tuesday, the Canadian transportation manufacturer said that Air Baltic had converted its seven remaining purchase options for the CS300 passenger jet to a firm order, bringing the airline’s total order to 20.

Among distressed preferreds, Fannie Mae and Freddie Mac dominated trading in that space as the GSEs continued to climb up. The preferreds were boosted on Tuesday as the market digested a slew of new unsealed documents related to a court case stemming from the government’s 2012 decision to commandeer a majority of the GSEs profits.

For all the strength seen in the market, there were some names that failed to join the surge.

Peabody Energy Corp. was one such name, though there was a good reason: The coal producer –the second largest in the world – filed for bankruptcy protections. The filing – the latest to hit the U.S. metals and mining space – effectively raised Fitch Ratings’ trailing 12-month default rate to 20% from 14.6% for that sector.

The company cited weak coal prices, as well as weakness in the Chinese economy for its woes. Additionally, it noted that the cheapness of natural gas and ongoing regulatory issues exacerbated the problems.

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