Distressed debt closes soft in volatile trading; oil and gas take beating; mining names weaker

By Stephanie N. Rotondo

Phoenix, Oct. 15 – There was “a lot of carnage” in the distressed bond market on Wednesday, a trader said.

It was another “ugly day,” another trader said.

The broader markets were also volatile – mostly toward the downside – amid a drop in consumer spending, manufacturing and inflation data. The weak information has investors considering whether the U.S. economy can hold up amid a global economic slowdown.

“It was up, up, up for so long,” the trader said. “It could stay this way for awhile.

“It’s definitely been a lot wider than this before,” he noted.

Treasuries also moved about broadly during midweek trading. A trader said the long bond was up 6 points at one point – “for a brief moment, then it kind of all evened out and then it just ebbed and flowed widely.”

Oil and gas pressured

Anything even remotely energy related was getting clobbered in midweek trading.

“Anything oil and gas, there’s just bloodshed,” a trader said.

That bloodshed was likely not helped by the broader market’s volatility, nor by the declining price of oil.

The price per barrel of West Texas Intermediate oil was down 14 cents to $81.70. Brent crude meantime dropped $1.19, or 1.4%, to $83.85.

The recently falling prices have been blamed on oversupply.

Back in the world of corporate bonds, Chesapeake Energy Corp.’s 5¾% notes due 2023 were seen off a point at 102¾ at one desk. At another, SandRidge Energy Inc.’s 7½% notes due 2021 were called down 3½ points at 87½.

Forest Oil Corp.’s 7¼% notes due 2019 were meantime seen falling 7 points to an 83 to 84 context, which compared to a 90 to 91 range previously.

Among independent oil and gas explorers, Linn Energy LLC’s 7¾% notes due 2021 ended off over 5 points at 95¼.

Also, Samson Investment Co.’s 9¾% notes due 2020 weakened nearly a point to 76¼.

Offshore oil drillers were also feeling the pain.

Hercules Offshore Inc.’s 7½% notes due 2021 finished the session down 4 points at 61, according to a trader. Another trader said the 10¼% notes due 2019 traded into the high-60s, down from the low-80s on Friday.

Mining weakens

The mining sector also came under pressure, as the market’s volatility weighed on commodity prices.

Cliffs Natural Resources Inc.’s had “a bunch of trades,” a trader said, all to the down side.

The softness came after the name experienced a rebound in the previous session, attributed to rising iron ore prices and potential merger interest from Glencore.

The trader said the 6¼% notes due 2040 were unchanged at 65, but the 4 7/8% notes due 2021 declined almost 3 points to 65½.

The 5.9% notes due 2020 lost almost 2 points, ending at 68¾.

In the coal space, Arch Coal Inc.’s 8% notes due 2019 declined 1½ points to 65½, a trader said. That same trader said Walter Energy Inc.’s 9½% notes due 2019 lost the same amount, closing around 83 3/8.

A second trader said Walter’s 11% PIK toggle notes due 2020 were “down a bit,” trading down to 40 from the mid-40s previously.

Retail sales decline

Energy and mining weren’t the only sectors taking hits on Wednesday.

Retailers were losing ground, as the latest retail sales report from the Commerce Department showed a 0.3% decline in sales in September.

The dip was the first decline since January, which was impacted by inclement weather.

Toys “R” Us Inc.’s 7 3/8% notes due 2018 dropped 2 points to 58½ bid, according to a market source. That source also saw J.C. Penney Co. Inc.’s 5.65% notes due 2020 losing 1½ points to 83½ bid.

At another shop, a trader said Sears Holdings Corp.’s 6 5/8% notes due 2018 lost almost a point to close at 88¼, while Claire’s Stores Inc.’s 9% notes due 2019 closed at 99 1/8, down a point.

© 2015 Prospect News.
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