Distressed debt quiet amid major winter storm; energy stays strong, retailing names gain

By Paul Deckelman

New York, Jan. 4 – Traders said that things were quiet on Thursday in the market for distressed debt and for the notes and bonds of otherwise underperforming companies and sectors, in line with a generally subdued overall high-yield bond market, chilled and stilled by the giant winter storm which slammed into New York and other major northeastern business centers.

But the energy sector remained red hot, fueled by a continued rise in crude oil prices to levels not seen since at least early 2015. That in turn pushed up oil and natural gas sector benchmark California Resources Corp., as well as peers such as EP Energy Corp., MEG Energy Corp., Denbury Resources Inc. and drillers Noble Holding International Ltd and Ensco plc.

Away from the energy realm, Rite Aid Corp. – whose bonds fell on Wednesday after the retailer released quarterly numbers that fell short of analysts’ expectations – was on the rebound.

Other sector names also seen better included J.C. Penney Co. Inc. and PetSmart Inc.

Another gainer was Canadian drug manufacturer Valeant Pharmaceuticals International Inc.

Energy leadership continues

For a third consecutive session, oil and natural gas exploration and production names were among the most active issues, in many cases posting solid gains.

As had also been the case on Tuesday and again on Wednesday, a trader said that Los Angeles-based E&P operator California Resources’ widely followed sector bellwether issue of 8% senior secured second-lien notes due 2022 was the most actively traded credit on the day, with over $52 million having changed hands.

He saw those notes up slightly more than 1 point on the day at 87½ bid.

Houston-based EP Energy’s 8% notes due 2025 – which had jumped by more than 4 points in Wednesday’s dealings – tacked on another nearly 1 full point Thursday to close at 79 15/16 bid, on volume of more than $25 million.

Plano, Texas-based sector peer Denbury Resources’ 9% notes due 2021 firmed by ¾ point on the day to finish at 105½ bid, as more than $16 million traded.

Calgary, Alta.-based MEG Energy’s 7% notes due 2024 were up by 1 point on the day to end at 90 bid, on turnover of more than $21 million.

Among the energy drillers, a trader said that Noble Energy’s 7¾% notes due 2024 jumped by more than 4 points on Thursday to close at 91 bid, with over $26 million having traded.

However, its 7.7% notes due 2025 eased by ¼ point to 86¾ bid, on volume of more than $32 million.

London-based driller Ensco plc’s 5¾% long bonds due 2044 were up more than 2½ points to 74 bid, with over $26 million of that paper having moved around.

Those oil and oil-related names firmed in line with a second straight day of gains in the price of crude oil, their fifth advance in the last six sessions.

The key domestic benchmark crude grade, West Texas Intermediate for February delivery, rose by 38 cents per barrel on the New York Mercantile Exchange on Thursday, closing at $62.01.

The key international crude grade – March-contract North Sea Brent – closed up by 23 cents per barrel on Thursday in London futures trading, settling at $68.07.

Those levels were the highest that crude has traded at since early in 2015 – the difference being that the prices then were heading lower, not higher, tumbling as part of the great slide in crude seen in 2014-2015 and beyond.

Non-oil names do well

The market strength carried through to credits outside of the oil and gas sector.

St. Clairsville, Ohio-based coal operator Murray Energy Corp.’s 11¼% notes due 2021 were particularly strong, with a market source seeing that issue up nearly 3 points on the day at 55 bid.

More than $26 million changed hands.

Frontier Communications Corp.’s 11% notes due 2025 gained almost 5/8 point to close at 75½ bid, on volume in the Stamford, Conn.-based wireline telecom provider’s paper of more than $16 million.

Laval, Que.-based drug manufacturer Valeant Pharmaceuticals’ 6 1/8% notes due 2025 were seen to have firmed by 5/8 point to 93 5/8 bid.

Its recently priced 9% notes due 2025 swelled by ¾ point to 105 7/8 bid, with volume of around $18 or $19 million of each issue.

Retailers on the rise

The retailing sphere also stood out, a trader said, noting that “J.C. Penney continues to rally, on good seasonal numbers” from the all-important year-end shopping period.

He said the Plano, Texas-based department store operator’s 7.4% notes due 2037 gained more than 2 points on the day to end around 72 bid.

Its 5.65% notes due 2020 “were up by another point” on Thursday, ending in a 97 to 98 bid context.

The trader said that Phoenix-based specialty retailer PetSmart’s 5 7/8% senior secured notes due 2025 “continue to move up,” ending at 80½.

And he saw Camp Hill, Pa.-based drugstore chain operator Rite Aid’s bonds “up from last night’s lows.”

A trader pegged its 6 1/8% notes due 2023 up 1½ points on the day at 91¼ bid, on busy volume of over $47 million.

Its 6¾% notes due 2021 were nearly ½ point better on the day, finishing at just over par, with over $16 million changing hands.

The Rite Aid bonds had fallen on Wednesday against a backdrop of disappointing quarterly same-store-sales and overall revenue numbers.

© 2015 Prospect News.
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