Distressed bonds weaker again; Peabody loses ground, Arch up; Fannie, Freddie pressured

By Stephanie N. Rotondo

Seattle, Sept. 13 – It was another mostly weak day for distressed bonds on Tuesday.

A trader noted that the focus remained on the flow of new high-yield issues entering the market.

In distressed dealings, Peabody Energy Corp. bonds were trading lower, even as sector peer Arch Coal Inc. was “up big,” according to one trader.

Peabody’s 6% notes due 2018 fell over 2 points to 21¾, a trader said. The 6¼% notes due 2021 dipped 1½ points to 22¾.

As for Arch, its 7¼% notes due 2021 rose nearly 1½ points to 4¾ – a sizeable move on a percentage basis.

The gains in Arch came as a bankruptcy court approved the company’s reorganization plan.

Meanwhile, Intelsat SA paper remained under pressure. A trader said the 5½% notes due 2023 dipped a quarter-point to 68.

Intelsat said Tuesday that it had received 99.74% of its outstanding 6 5/8% notes due 2022 by the early tender date. Holders will receive new 8% senior secured notes due 2024 plus cash.

Fannie Mae and Freddie Mac preferreds continued to lose ground Tuesday. The securities have been punished by Friday’s news that a U.S. District Court judge dismissed a shareholder lawsuit brought over the government’s net worth sweep.

The preferreds were down 3% to 6% at mid-morning – and it only got worse.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds dropped 13 cents to close at $3.03, while the 6.55% noncumulative preferreds declined 33 cents to $2.27.

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