Distressed debt market trading thins as summer nears its end; oil and gas space stays firm

By Stephanie N. Rotondo

Seattle, Aug. 19 – Distressed oil and gas bonds continued to gain ground with domestic crude prices on Friday.

The commodity was only slightly higher on the day, trading at $48.48 a barrel. Oil had risen over 3% on Thursday, helped largely by hopes OPEC could reach a production freeze deal at an informal meeting next month.

It was also reported Friday by Baker Hughes that active U.S. drill rigs increased for the eighth consecutive week, bringing the total number of running rigs to over 400.

Those levels have not been seen since February.

Chesapeake Energy Corp.’s 8% second-lien notes due 2022 were still trading, though not as actively as they had been earlier in the week, a market source said. The paper ended unchanged at 92¾.

However, activity picked up in California Resources Corp.’s 8% second-lien notes due 2022, which rose 1½ points to 68 bid, 68¼ offered.

Meanwhile, Linn Energy LLC’s 7¾% notes due 2021 added nearly 2 points to end at 22 bid, according to a market source.

Away from oil and gas, trading activity was muted, sources commented. Investors were eyeing recently priced high-yield deals, such as Tallgrass Energy Partners LP’s $400 million of 5½% senior notes due 2024, which came Thursday.

But even among recent issues, traders reported that liquidity was on the lighter side. The subdued tone was attributed largely to it being mid-August and many are preparing for Back to School activities.

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