Oil, gas bonds trade higher; Ensign, Shelf Drilling, PBF rally; China Evergrande mixed

By Cristal Cody

Tupelo, Miss., Sept. 23 – Distressed oil and gas bonds rallied on Thursday as oil futures remained over $1 higher for a second consecutive session.

Calgary, Alta.-based oilfield servicer Ensign Drilling Inc.’s 9¼% senior notes due 2024 (Caa2/CCC+) jumped 2 points to 98 bid on $4 million of secondary supply, a source said.

United Arab Emirates-based Shelf Drilling Holdings Ltd.’s 8¼% senior notes due 2025 (Caa3/CCC+) traded about 2 points stronger at 76¾ bid on over $4.5 million of bond volume.

PBF Holding Co. LLC’s 7¼% senior notes due 2025 (B3/B/B+) gained 1¾ points to 67¾ bid. Nearly $7 million of the Parsippany, N.J.-based petroleum refiner’s notes were traded.

Dallas-based gas supplier Energy Transfer Partners LP’s 6¼% perpetual preferred units (BB) traded more than 2¼ points higher at the 91¼ bid area on over $7 million of supply.

Market tone was mostly upbeat as oil prices rose Thursday after picking up more than $1.50 on Wednesday.

Brent crude futures for November deliveries added $1.06 to settle the day at $77.25 a barrel.

The iShares iBoxx High Yield Corporate Bond ETF edged up 4 cents to $88.04.

China Evergrande Group’s dollar bonds were about 3½ points to nearly 4 points better with some issues weaker on Thursday as the company arranged to make an interest payment, though a default is widely expected, sources report.

China Evergrande’s offshore bonds added 2¾ points to 6 3/8 points on Wednesday and improved about ½ point to 3¾ points on Tuesday after sinking 2 points to 5¼ points on Monday.

Meanwhile, bonds from Midas Intermediate Holdco II LLC, doing business as Service King, fell 4½ points as the bonds return gains made in late August.

China Evergrande active

China Evergrande Group’s 8¼% senior notes due 2022 (Caa2/CCC-/CCC) picked up nearly 4 points to trade at 33 bid by the close on Thursday, a source said.

Secondary volume totaled $4 million.

The bonds were about 1 point to 2 points better on Wednesday.

Evergrande’s 8¾% senior notes due 2025 (C/C/C) were weaker on Thursday on heavier volume totaling more than $17.5 million. The bonds dropped 2 1/8 points to 28½ bid.

The Shenzhen, China-based real estate developer’s bonds rallied on Wednesday, trading up 6 3/8 points on more than $16.5 million of activity.

Midas bonds down

In other secondary action on Thursday, Midas Intermediate Holdco II’s 7 7/8% senior notes due 2022 (Caa3/CCC-) traded 4½ points weaker at 83½ bid on $2 million of volume, a source said.

The bonds were quoted at 94¾ bid on Aug. 27 after rallying more than 10 points from the prior week.

The Richardson, Tex.-based auto body repair provider’s notes traded as low as 74½ bid in mid-August.

Distressed index positive

Distressed index returns remained mostly stronger midweek.

The S&P U.S. High Yield Corporate Distressed Bond index total return on Wednesday was 0.41%, compared to 0.51% on Tuesday and minus 1% on Monday.

Month-to-date total returns improved to 1.09% from 0.67% on Tuesday and 0.16% at the start of the week.

Year-to-date total returns totaled 28.06% on Wednesday versus 27.54% on Tuesday and 26.89% on Monday.

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