Distressed commodity names get hit again; AMD bonds, equity beaten down; Fannie, Freddie gain

By Stephanie N. Rotondo

Phoenix, July 7 – The distressed debt market was weak yet again Tuesday, even as the equity markets rebounded on hopes Greece and its European Union creditors have come to terms.

Reports were circulating that a verbal agreement had been made and that Greece would formally propose the deal on Wednesday.

The distressed debt space wasn’t the only part of the bond market losing ground, as junk bonds were also retreating.

The KDP High Yield Index fell to 69.91, with a 5.78% yield, from 70.07, with a 5.74% yield, on Monday. The reading is getting perilously close to the index’s 52-week low of 69.01.

As for the day’s dealings, the focus continued to be on commodities.

“Anything commodity-linked got hammered again today,” a trader said.

Those declines came even as oil prices managed to rally. West Texas Intermediate crude improved by 22 cents to $52.75 a barrel.

Among oil and gas names, SandRidge Energy Inc. took another beating, falling nearly 5 points to 38¼ bid, according to a market source.

In the coal sector, a trader said Peabody Energy Corp.’s 6% notes due 2018 “dipped into the high-30s,” while the “other unsecureds” – such as the 6¼% notes due 2021 – traded into the high-20s.

The trader pegged the 10% notes due 2022 at 56½.

Consol Energy Inc.’s 8% notes due 2023 were also getting hit, falling 3 points to 87½ bid.

As for the iron industry, Fortescue Metals Group Ltd.’s bonds remained under pressure as well.

A trader saw the 9¾% notes due 2022 closing around “98-ish,” while the 8¼% notes due 2019 ended “around 80.”

“They did touch into the high-70s,” the trader noted of the latter issue.

At another desk, the 6 7/8% notes due 2022 were deemed half a point higher at 65½.

AMD debt dives

Advanced Micro Devices Inc.’s debt couldn’t catch a break Tuesday, as the bonds continued to weaken after the company lowered its quarterly guidance on Monday.

A trader said the name was “down a good bit,” calling the bonds off “3 to 5 points, maybe even more.”

He called the 7% notes due 2024 5 points lower at 79.

Another source pegged the 7½% notes due 2022 at 82½ bid, down 6½ points on the day.

The company’s equity (Nasdaq: AMD) also got walloped, falling 38 cents, or 15.38%, to $2.09.

Late Monday, the Sunnyvale, Calif.-based chipmaker issued an update for the second quarter, indicating that revenue for the period ended June 27 would “be lower than previously guided.” Under the new forecast, revenue is expected to decline 8% sequentially, compared to a previously anticipated 3% decrease.

The company cited weaker-than-expected PC demand for the downward revision.

On the other hand, cash and equivalents are expected to be in line with previous estimates at around $830 million.

The second-quarter results will be released July 16 after the market closes.

Fannie, Freddie rebound

Despite the modest strength seen in the preferred stock market, a trader noted that Fannie Mae and Freddie Mac paper was selling off early Tuesday. He wasn’t sure what was sparking the move, speculating that “there must be something going on in the courts.”

However, the preferreds rallied by the end of the day, closing in positive territory.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) closed at $3.90, up 12 cents, or 3.17%. The shares were off a dime, or 2.65%, at $3.68 at mid-morning.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were meantime seen ending up 7 cents, or 1.83%, at $3.89. That issue was down 15 cents, or 3.93%, at $3.67 in earlier trading.

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