Oversupply, soft pricing continue to pressure distressed commodity bonds; volume muted

By Stephanie N. Rotondo

Phoenix, March 31 – It was all commodities, all the time in the distressed debt arena on Tuesday.

“A lot of commodity names were getting hammered,” a trader said. Perhaps most notably was the iron ore space.

“There’s more chatter about how soft the market is for pricing,” the trader said. “Oversupply, weak demand, China’s peaked.”

Underscoring that point was a research report that was circulating. The report speculated that iron ore prices could soon fall below $40 per tonne.

In the iron sector, it was FMG Resources that was taking some of the biggest hits, with traders seeing the company’s debt dropping as much as 4 points on the day.

The coal sector was also under pressure, hurting companies like Peabody Energy Corp.

In the oil and gas space, Breitburn Energy Partners LP’s debt gave back some of the gains incurred on Monday when the company announced a new $1 billion investment. A decent dip in oil prices likely didn’t help matters.

Though the market remained focused on commodities, a trader did note that liquidity was thinning out ahead of the Good Friday holiday.

“We’re winding down pretty quickly this week,” he said.

FMG Resources’ debt turned south Tuesday, as analysts predict that iron ore prices would continue to plummet.

One trader said the 6 7/8% notes due 2022 fell 1½ points to 74 5/8, while the 6% notes due 2017 slipped half a point to 99¼.

© 2015 Prospect News.
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