Liquidity in the distressed debt arena remains muted; oil prices falter, taking oil and gas names along

By Stephanie N. Rotondo

Seattle, Aug. 21 – Trading in the distressed debt market remained muted on Monday.

There was even little going on in Energy Future Holdings Corp.’s debt – or any linked to it – in the wake of news that Sempra Energy had topped a bid from Berkshire Hathaway to take over Oncor Electric.

Sempra said it would pay $9.45 billion for the unit of the bankrupt power producer, as well as take on its $9.35 billion in debt.

Berkshire had made a $9 billion bid for the company, but has thus far refused to go higher.

Elsewhere in the energy space, oil and gas names were getting hit as domestic crude oil prices stemmed a two-day rally.

West Texas Intermediate crude declined $1.11, or 2.29%, to $47.40, as OPEC producers were scheduled to meet to discuss compliance with the cartel’s production cut agreement. Reports regarding July’s output indicate that compliance has been less than stellar.

As oil wanes, so did Denbury Resources Inc.’s 6 3/8% notes due 2021, according to a market source.

The source saw the debt dropping 2 points to 57½ bid.

However, while the oil and gas space was on the weaker side overall, Canadian oilsands company MEG Energy Corp. saw its 7% notes due 2024 adding nearly a point to close at 78¾ bid.

There was no fresh news out to cause the gains.

Away from oil and gas, Frontier Communications Corp. remained active and weaker, according to sources.

At one desk, the benchmark 11% notes due 2025 were seen in an 82¾ to 83 context, down from trades of 83¾ on Friday. The 10½% notes due 2022 finished at 86 bid, 86¼ offered, down a quarter- to a half-point.

Another source pegged the 7 5/8% notes due 2024 at 76¼, down nearly a point on the day.

There hasn’t been any fresh news out on the Norwalk, Conn.-based telecommunications company since earnings were released on Aug. 1. And while the earnings initially caused a “relief rally” in the debt – as one trader called it – the relief soon faded and the bonds have been trending lower ever since.

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