Distressed energy space improves as OPEC reaches production deal; Community Health bonds rise

By Stephanie N. Rotondo

Seattle, Sept. 28 – The distressed debt market improved in midweek trading, due in large part to gains seen in the energy sector.

The gains came as it was reported that OPEC had reached a deal to limit production for the first time since 2008. The decision came as members of the cartel held an informal meeting in Algeria.

Though details have not yet been decided – official terms are expected to be ironed out at a formal meeting in November – OPEC members agreed to cut total production to 32.5 million barrels per day.

Currently, the organization is pumping a total of 33.24 million bpd.

The news resulted in an over 5% improvement in domestic crude prices, which closed at $46.98 a barrel. That in turn boosted distressed oil and gas names.

California Resources Corp.’s 8% second-lien notes due 2022, for instance, were “up smartly,” a trader said, seeing the issue adding over 2 points to close at 66.

There was “pretty heavy volume” in the name, he added.

Whiting Petroleum Corp. was another gainer, as its 6¼% notes due 2023 rose 1½ points to 89, according to a trader.

In Chesapeake Energy Corp., a trader said the 4 7/8% notes due 2022 were nearly 1½ points higher at 82.

Even Vanguard Natural Resources LP’s 7 7/8% notes due 2020 pushed higher, moving up a point to 49.

“That’s one I don’t see very often,” a trader said.

In distressed oil and gas preferreds, Vanguard and its fellow MLP peer Legacy Reserves LP had the honor of being the day’s biggest percentage gainers.

Vanguard’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) gained 21 cents, or 7.07%, to $3.18.

Legacy’s 8% series A fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) improved 39 cents, or 9.73%, to close at $4.40, while the 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) added 21 cents, or 5.07%.

Though not overly active, each of the preferred issues saw above average trading volume during the session.

Community Health rebounds

A trader said Community Health Systems Inc. bonds “rallied” on Wednesday, as the company said “they would rather sell themselves as a whole” rather than piece by piece.

In response, the 6 7/8% notes due 2022 gained “almost 1½ points” to close at 85. The 7 1/8% notes due 2020 traded up nearly 2 points to 92 7/8.

On Sept. 19, the struggling Franklin, Tenn.-based hospital operator said that it was in talks with financial adviso\ers and that it was exploring its options as high debt levels and operational issues have weighed on the bottom line.

Private equity firm Apollo Global Management was one firm reportedly interested in at least some of the company’s assets.

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