Crude oil drop weighs on distressed bonds; Alpha Natural files for bankruptcy; Sears rises

By Stephanie N. Rotondo

Phoenix, Aug. 3 – Another decline in oil prices put pressure on the distressed debt market on Monday, the first trading day of August.

West Texas Intermediate crude fell $1.70, or 3.61%, to $45.42 a barrel, as concerns about oversupply continued to grow. Those concerns have been fueled recently by increasing domestic rig counts.

On the heels of the decline, oil exploration and development bonds were getting whacked.

In other commodities, coal producer Alpha Natural Resources Inc. saw its bonds improving after the company announced it had filed for bankruptcy.

The news, a trader noted, was not “earth-shattering.

“I don’t think it’s any surprise,” he said, seeing the company’s unsecured issues trading in a 3 to 4 context.

Weakening metallurgical coal prices and softening demand have brought several coal companies down this year. Alpha Natural will join sector peers Walter Energy Inc., Patriot Coal Corp. and James River Coal Co. under bankruptcy protections.

A trader said Sears Holdings Corp.’s 6 5/8% notes due 2018 were “up a few points” after the Hoffman Estates, Ill.-based retailer announced a tender offer.

Abengoa SA’s 7¾% notes due 2020 ended Monday’s session considerably weaker, according to a trader.

Puerto Rico missed a debt service payment for the Puerto Rico Public Finance Corp. over the weekend, marking the first time the island commonwealth has ever defaulted on its debt.

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