Energy bonds slide with lower oil; SunEdison remains weak; Valeant, AK Steel better

By Paul Deckelman

New Yok, April 1 – Distressed debt was seen mixed on Friday amid a backdrop of mixed results in the larger high-yield bond market.

Traders saw a widespread pullback in such energy issues as Oasis Petroleum Inc., Whiting Petroleum Corp. and Continental Resources, Inc., as world crude oil prices went south on indications that Saudi Arabia will not freeze its crude output unless other major players do so as well.

Also in the energy sphere, SunEdison Inc. shares continued to drop, and its bonds and preferred shares remained at weak levels

On the upside, traders saw better levels in such normally underperforming names as AK Steel Holding Corp. and Intelsat Jackson Holdings SA

Another beleaguered name seen doing better was Valeant Pharmaceuticals International, Inc., just a day after a Moody’s Investors Service debt downgrade.

Oil issues down

A trader said that “an active name today was the Continental Resources, 5% notes due 2022.”

He said that “a lot of the oil stuff got hit because oil was down pretty good today - but this was only down 1 point, to 86. That’s not dreadful for them.”

More than $41 million of those bonds were seen having traded on the day.

Among other names that he saw on the downside were Oasis Petroleum’s 6 7/8% notes due 2022, which lost 1 point, to 73 ½ bid, on volume of over $15 million.

A second market source pegged those bonds at 73 ¼ bid, down 1 ¼ points on the day.

And the first trader said that Whiting Petroleum’s 5 ¾% notes due 2021 were big losers on the day, down 3 ¼ points, to 63¾.

“All of these were fairly actively traded today,” he said with Whiting’s turnover at more than $13 million.

The slump extended as well to Anadarko Petroleum Corp.’s split-rated issues, including its 5.55% notes due 2026, which were down 5/8 point at 100 ½, with over $61 million traded.

The proximate cause of Friday’s energy sector retreat was a big drop in world crude oil prices, spurred on by reports that Saudi Arabian officials have indicated that kingdom will not freeze its production output without Iran and other major global producers doing so as well.

The benchmark U.S. crude oil grade, West Texas Intermediate for May delivery lost $1.55 per barrel on Friday trading on the New York Mercantile Exchange, settling at $36.79 – its first loss after two straight gains and five consecutive losses before that.

Meanwhile global benchmark Brent crude for June delivery – the new front month – slid by more than 4% on the day, falling $1.66 per barrel in trading on the London ICE Futures Exchange to settle in at $38.67. It was the June contract’s first loss after two straight gains and four losses before that.

Oil issues down

A trader said that “an active name today was the Continental Resources, 5% notes due 2022.”

He said that “a lot of the oil stuff got hit because oil was down pretty good today – but this was only down 1 point, to 86. That’s not dreadful for them.”

More than $41 million of those bonds traded on the day.

Among other names that he saw on the downside were Oasis Petroleum’s 6 7/8% notes due 2022, which lost 1 point to 73½ bid, on volume of over $15 million.

A second market source pegged those bonds at 73¼ bid, down 1¼ points on the day.

And the first trader said that Whiting Petroleum’s 5¾% notes due 2021 were big losers on the day, down 3¼ points to 63¾.

“All of these were fairly actively traded today,” he said with Whiting’s turnover at more than $13 million.

The proximate cause of Friday’s energy sector retreat was a big drop in world crude oil prices, spurred on by reports that Saudi Arabian officials have indicated that kingdom will not freeze its production output without Iran and other major global producers doing so as well.

The benchmark U.S. crude oil grade, West Texas Intermediate for May delivery lost $1.55 per barrel on Friday trading on the New York Mercantile Exchange, settling at $36.79 – its first loss after two straight gains and five consecutive losses before that.

Meanwhile global benchmark Brent crude for June delivery – the new front month – slid by more than 4% on the day, falling $1.66 per barrel in trading on the London ICE Futures Exchange to settle in at $38.67. It was the June contract’s first loss after two straight gains and four losses before that.

Sun Edison under pressure

Also in the energy sphere, SunEdison shares continued to drop, and its bonds and preferred shares remained at weak levels.

A market source said that SunEdison’s shares were down 11 cents, or 20%, to $0.43, but saw no news out for the solar power company, which was beset by negative headlines this past week and seems a likely candidate for Chapter 11 bankruptcy protection.

The SunEdison bonds are all around 4, but the SunEdison 6.75% preferreds were in the area of 20 on Friday, which was down from 26 previously.

Intelsat is active

Away from the energy sector, one of the traders said: “Intelsat has been a pretty good mover in the distressed area.”

He saw the Luxembourg-based communications satellite company’s 6 5/8% notes due 2022 “pretty active,” seeing almost $20 million traded and quoting the bonds up around 2 points to 55½ bid.

A second trader saw the notes at 56 bid, calling them up 2¼ points, with over $19 million traded.

Its 7¼% notes due 2020 were up ½ point to 65.

Elsewhere, AK Steel’s 7 5/8% notes due 2020 were seen up 1¼ points at 64 bid, though on no fresh news.

Valeant bounces back

Valeant Pharmaceuticals shareholders shrugged off Thursday’s news of a downgrade of some of the company’s debt ratings and took the bonds higher Friday.

Its 5 7/8% notes due 2023 gained ¼ point to end at 78¼ bid, with over $15 million traded, a market source said.

Its 7½% notes due 2021 were likewise ¼ point better at 84 bid, on volume of over $12 million.

-Rebecca Melvin contributed to this review

© 2015 Prospect News.
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