Distressed bonds bounce back after two-day sell-off; California Resources up with oil; Calumet firms

By Stephanie N. Rotondo

Seattle, June 28 – Distressed bonds were doing better on Tuesday, as the broader markets rebounded from two days of hefty losses.

Those losses were due to concerns about the United Kingdom’s vote to leave the European Union. Though uncertainties about what that will mean to the country – and the markets – continue, Tuesday’s rally was attributed to the sell-off being overdone.

“In general, everything was bouncing back a little bit,” a trader said. “A lot of things recovered about 1 to 2 points.”

However, the trader also noted that investors were opting for more “higher-quality names” than for distressed credits.

That being said, an over 3.5% gain in domestic crude oil prices – helped in part by the broader rebound, as well as a weaker dollar and a looming oil and gas strike in Norway – was boosting oil and gas names such as California Resources Corp.

One trader said the 8% second-lien notes due 2022 were “pretty active,” moving “up a bunch” to a 68 to 68½ context. Another trader said the issue was up nearly 2 points at 67½.

The second trader also saw the 6% notes due 2024 inching up almost a point to 46½.

Elsewhere, Intelsat SA paper was also mostly better for the day, though on no news.

A trader said the 8% senior secured notes due 2022 linked to Intelsat Jackson Holdings SA “rallied back up close to 98,” after getting “beat up” on Monday.

But the trader also saw the “longer-dated luxco bonds” – such as the 7¾% notes due 2021 – trading “a little bit lower” around 23½.

At another desk, a trader said the 7¼% notes due 2020 pushed up 1½ points to close at 69½ in “fairly active” trading.

Calumet firms on asset sale

Calumet Specialty Products Partners LP’s 6½% notes due 2021 popped over 2 points on Tuesday after the Indianapolis-based refiner and processor of specialty hydrocarbon products said it had sold its 50% interest in a joint-venture refinery.

A trader said the bonds improved 2½ points to 69 5/8.

Calumet sold its stake in Dakota Prairie Refining for $28.5 million in cash to its JV partner, WBI Energy, a subsidiary of MDU Resources Group. MDU also assumed $66 million of debt linked to the refinery.

WBI then sold the entire facility to Tesoro Corp. for an undisclosed sum.

The refinery opened last year, but has been struggling to turn a profit, given the fact that oil and fuel prices have tanked. For its part, MDU reported $7.2 million in losses from the refinery for the first three months of 2016. Calumet posted a net loss of $67.7 million for its first quarter, which prompted management to consider divesting certain assets.

© 2015 Prospect News.
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