Peabody punished after earnings warning; California Resources slide continues; Puerto Rico payments help bonds

By Paul Deckelman

New York, July 1 – The month of July opened on Wednesday with considerable news-driven activity among some distressed-debt names, even as the market approached the impending July 4th holiday, usually a time of lessened activity.

Peabody Energy Corp.’s bonds, convertible debt and the latter’s underlying shares were all heading downwards after the big coal producer revised its previously issued earnings guidance downward, blaming the anticipated fall-off on weather-related shipment issues in the Powder River Basin of Wyoming and lower seaborne coal pricing.

Meanwhile, the badly battered bonds of Peabody’s coal industry sector peers such as Arch Coal, Inc. and Alpha Natural Resources, Inc. continued to languish. The latter’s creditors have reportedly hired legal and financial advisors in preparation for talks with the company ahead of an Aug. 1 repayment deadline on some of its debt.

Also in the energy world, California Resources Corp.’s bonds continued to slide in the face of falling oil prices.

But Puerto Rico’s general obligations bonds were better – and saw some trading activity from distressed-debt-focused accounts as well as the usual municipals investor base – on the news that the financially challenged United States island commonwealth had made scheduled July 1 payments totaling some $1.9 billion on some of its G.O. bonds, a bank loan and on Puerto Rico Electric Power Authority debt, putting to rest – at least for now – investor fears of a possible default on those obligations.

The power authority’s creditors, meanwhile, agreed to extend a forbearance agreement set to expire on June 30 until mid-September.

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