Distressed volume picks up a little; energy better as oil jumps; food stores firmer after slide

By Paul Deckelman

New York, Aug. 31 – Traders saw a little more activity in the bonds of distressed or underperforming companies on Thursday, in line with a somewhat busier feel in the overall high-yield junk bond market – even ahead of the upcoming Labor Day holiday break in the United States.

Besides being busier, things had a firmer feel to them.

Trader said that strengthening crude oil prices helped to push up energy names such as California Resources Corp., MEG Energy Corp. and drilling contractor Ensco plc.

However, EP Energy Corp. and Atwood Oceanics were seen ending on the downside.

Elsewhere, traders noticed a firmer trend in the recently hard-pressed supermarkets sector, including credits like Fresh Market Inc., Ingles Markets Inc. and BI-LO Holdings Inc.

And traders saw upside activity across Hertz Corp.’s capital structure.

Volume seen busier

With the week winding down on Thursday ahead of the upcoming Labor Day holiday break in the United States, volume in distressed issues seemed a little busier Thursday than it had been on Wednesday, in line with a pickup of activity in the overall junk bond market.

A trader saw total high-yield volume ending up around $2.2 billion, which he called “not so horrendous” – it was certainly more active than Wednesday’s roughly $1.5 billion total.

However, he acknowledged that “a normal day would see $3 billion to $4 billion” of turnover.

Energy names improve

Among specific areas, a trader said that “the oil stuff was better today,” aided by a sharp rise in crude oil prices. October-delivery West Texas Intermediate crude jumped by $1.27 per barrel in Thursday trading on the New York Mercantile Exchange, settling at $47.23.

He saw California Resources’ sector benchmark 8% notes due 2022 better by ¾ point at 55¼ bid.

A second trader located those bonds 1 point higher on the day at 55¾ bid.

More than $13 million of the Los Angeles-based oil and natural gas exploration and production company’s paper changed hands.

Also in that sector, Calgary, Alta.-based shale oil prodder MEG Energy’s 7% notes due 2024 moved up by ½ point to 79¾ bid.

British offshore oil drilling contractor Ensco’s 4½% notes due 2024 were seen up nearly 1½ points on the day at 73¾ bid.

However, a trader noted that not all of the energy names were finishing on the upside.

He saw Houston-based driller Atwood Oceanics – which is in the process of being acquired by Ensco – lower on the day, its 6½% notes due 2020 down 5/8 point at 97 7/8 bid.

And he saw Houston-based EP Energy’s 8% notes due 2025 down 1¼ points at 66 bid.

Supermarkets seen better

In the supermarket sector – recently reeling as retailing giant Amazon.com completed its acquisition of upscale grocer Whole Foods Markets and proceeded to slash prices on many items by as much as 43% – traders saw some improvement, finally.

A trader said the sector was “pretty quiet” – but he saw Fresh Market’s 9¾% notes due 2023 “trading a little” and moving up to by ¼ point to 76 bid, its first gain in a number of sessions.

A trader saw Ingles Markets’ 5¾% notes due 2023 up ¼ point at 98½ but said that the issue “probably was just lifted by the overall [firm] market rather than a company or industry specific development.

BI-LO Holdings’ 9¼% notes due 2019 were up more than a deuce on the day at 88¾ bid.

Hertz hangs in there

A trader said that “Hertz was definitely doing better across the board” on Thursday, rebounding after struggling recently after a negative analyst’s report on the Estero, Fla.-based car-rental giant.

He saw Hertz’ s 7 5/8% senior secured second-lien notes due 2022 moving up to a 92 to 93 bid context from prior levels around 91 to 92.

A second trader quoted the Hertz 5½% notes due 2024 at 86 bid, calling them up more than 2 points on the session

Yet another trader called the latter bonds up 1½ points on the day at 86 bid.

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