Cliffs surges higher for a second session; E&P uplifted by oil prices; Neiman stops dramatic losses

By Colin Hanner

Chicago, Feb. 10 – A week capped by earnings announcements by several companies led to the continued rise of an iron ore producer in the distressed market on Friday, a trader said, while several companies in the exploration and production sector rode higher oil prices on the day.

Cleveland-based iron ore miner Cliffs Natural Resources, Inc. saw another multi-point gain on the session in its distressed notes, compounding into a nearly double-digit gain since the company announced its fourth quarter results on Thursday.

In the E&P sphere, California Resources Corp. was up on a “bunch of trades,” a trader said, while Denbury Resources Corp. and driller GulfMark Offshore Inc. saw gains of their own.

St. Clairsville, Ohio-based coal company Murray Energy Corp. stayed active, though reverted back to trading tight after jumping more than a point in its distressed issue.

Movement was a little less rambunctious for retailer Neiman Marcus Group, Inc. after a week of downturns in two sets of its issued debt, satellite telecommunications company Intelsat Jackson Holdings SA posted higher finishes on a relatively higher week and pharmaceutical companies Valeant International Pharmaceuticals, Inc. and Concordia International Corp. were both down on the last trading day of the week.

Cliffs upsurge

After announcing positive quarterly results on Thursday, Cliffs Natural Resources’ 6¼% notes due 2040 were up 3 points, and the upsurge continued Friday.

The notes were up 5 points to 89½, a trader said, adding that “there was some heavy volume there.”

Along with a series of tender offers for shorter-term senior notes, the company said that it had decreased its debt load in the fourth quarter to $1.8 billion from $2.4 billion year-over-year.

Total debt at the end of the fourth quarter of 2016 was $2.2 billion versus $2.7 billion at the end of the fourth quarter of 2015.

“With much leaner costs, volume certainty in the United States, lower interest expense, a lighter debt load and sanity restored to the market, we are in position to generate on of the best cash flow years in the history of Cliffs Natural Resources,” chairman, president and chief executive officer Lourenco Goncalves said on the company’s fourth quarter earnings conference call on Thursday.

The iron ore industry also received a boon on Friday, according to S&P Global Platts, which assessed that the Platts Iron Ore Index jumped $2.60 per metric dry ton to $86.60. The price of steel and imports from China have played a part in the recent surge, S&P said.

E&P rockets

The stalemate of crude oil prices in the low-$50 range were lifted by encouraging news coming out of the Organization of Petroleum Exporting, as compliance with an oil supply cut deal going well.

The International Energy Agency said that an initial record compliance rate of 90%, plus more by countries like Saudi Arabia, were encouraging to the oil sector.

“OPEC nevertheless appears to have made a solid start to what is a six-month process,” the IEA said in a news release. “This first cut is certainly one of the deepest in the history of OPEC output cut initiatives.”

Some distressed companies seemed to benefit from the uptick on the session, including California Resources, whose 8% notes due 2022 were up 1 point to 88½, two market sources said.

Plano, Texas-based Denbury Resources’ 4 5/8% notes due 2023 were up 3/8 point to 78½, a trader said.

And Houston-based GulfMark Offshore Inc.’s 6 3/8% notes due 2022 were up 2 points to 65½, a market source said.

Murray posts gain

Staying active for most of the week, Murray Energy rounded out Friday’s session with its second-straight session of gains, a trader said.

The 11¼% notes due 2021 were up ½ point to 75½ a day following a 1½-point gain.

Neiman down

Friday’s session put a bit of a bandage on the hemorrhaging Neiman Marcus Group had felt for most of the week.

After a downgrade by S&P on Thursday, citing brick-and-mortar challenges like weak mall traffic, Neiman built on losses it had built two sessions prior.

On Friday, the 8% notes due 2021 were down just ¼ point to 55½, a trader said.

To start the week, the same notes finished with a 60½ handle.

Pharmaceuticals drift

Two sets of Valeant’s notes were down on the session, a market source said, including the 6 1/8% notes due 2020, which were down a marginal 1/8 point to 77 1/8.

Following with a similar small loss were Valeant’s 6 3/8% notes due 2020, which were down 3/8 point to 89½, a trader said.

And Concordia International’s 9½% notes due 2022 were down 1 point to 46.

Distressed roundup

Seeing one of the most active days in the distressed market were iHeartCommunications, Inc.’s 14% notes due 2021, a trader said, which traded up 1 5/8 points to 38 1/8.

Columbus, Ohio-based chemical company Hexion, Inc. saw a 1-point gain in its 9% notes due 2020, which finished with a 76½ handle, a trader said.

And two series of Intelsat Jackson Holdings notes were up, including the 8 1/8% notes due 2023, which were up 1¾ points to 34¾, though only saw a couple of trades.

The 7¾% notes due 2021 were up 3/8 point to 35.

Devika Patel contributed to this review

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