Oil and gas rise as oil prices continue to rally; Caesars holders support plan; JCPenney firms

By Stephanie N. Rotondo

Phoenix, Jan. 8 – The distressed debt market was “raging today,” a trader reported Thursday.

The gains in the bond market came as the Dow Jones industrial average jumped 324 points and the S&P 500 index erased all of the loses incurred so far this year.

The strength of the market was likely also helped by another gain in oil prices, which in turn helped oil and gas credits move higher.

“All oil has to do is not go down and they rebound a little,” a trader said.

Caesars Entertainment Corp. was meantime in the news, as the company announced that it had received over 50% approval from senior secured noteholders on its restructuring plan that would put the operating unit into bankruptcy no later than Jan. 20.

A trader noted that while the bonds were trading actively, they were only slightly better to unchanged on the day.

Elsewhere, J.C. Penney Co. Inc.’s debt was “pretty active,” according to a trader, as the company announced more store closures and job cuts.

Earlier in the week, the retailer had released preliminary holiday season same-store sales, which improved 3.7% year over year.

Oil and gas powers up

Another gain in oil prices helped push up the oil and gas space, a trader reported Thursday.

West Texas Intermediate crude ended 30 cents higher at $48.95 per barrel for February delivery.

However, Brent crude dipped a dime to $51.05.

Halcon Resources Corp. was one of the more active names in the sector, as a trader said the 8 7/8% notes due 2021 traded at lest 20 times.

He said the issue closed up over 3 points at 75 3/8.

The 9¾% notes due 2020 were over 3½ points better at 77, he said.

In independent E&P companies, Linn Energy LLC’s 8 5/8% notes due 2020 improved about 1½ points, closing at 89¾, the trader said.

The 6¾% notes due 2019 moved up almost 2 points to 86.

At another desk, Linn’s 7¾% notes due 2021 were deemed a point higher at 86½ bid.

SandRidge Energy Inc.’s 7½% notes due 2021 finished the day at 65 1/8, up over 3½ points, according to a trader.

That issue was seen at 65½ bid at another shop, up 4 points.

However, a trader remarked that California Resources Corp.’s 6% notes due 2024 “did not really rebound,” seeing them unchanged at 81.

Caesars’ plan inches forward

Over 50% of holders of Caesars’ 11¼% notes due 2017, 8½% notes due 2020 and 9% notes due 2020 have signed on to a restructuring plan and forbearance agreement, the Las Vegas-based casino operator said Thursday.

While the company works to secure more support for its plan, investors were focusing a fair bit of attention in the bonds.

A trader said the 9% notes saw at least 20 round-lot trades during the session, pegging the paper at 73½.

That was up half a point on the day, he said.

The 11¼% notes were meantime steady at 74¼.

Caesars is still working on drumming up more support for its restructuring plan, which would put Caesars Operating Co. Inc. into bankruptcy.

The company needs at least 60% of noteholders to agree to the deal in order for it to move forward.

Under the plan, the operating unit would emerge as a two-pronged real estate investment trust, with one side owning the properties and the other managing them.

JCPenney plans closures

Plano, Texas-based JCPenney said Thursday that it was closing 40 underperforming stores in 2015 as the company continues to work on its turnaround effort.

The closures will impact about 2,250 employees.

Still, investors greeted the news positively.

A trader said the 5.65% notes due 2020 were “pretty active” at 83¾, up a point.

Another market source echoed that level, calling the bonds up 1¼ points.

News of the store closures came just days after the company released preliminary same-store sales results for the nine-week holiday period. The report indicated that sales during that time period improved 3.7% year over year.

Given the gain in sales, the company also said that it was expecting same-store sales for the fourth quarter to be at the high end of its 2% to 4% forecast.

Fannie, Freddie busy

Fannie Mae and Freddie Mac paper was trading actively as investors reacted to a housing speech from President Barack Obama.

Investors were looking at the kind of language Obama used to see if they could discern his plans for government-sponsored entities going forward. As previously reported, Keefe, Bruyette & Woods said in a research note published Monday that if he does not mention any specific housing reform bills currently being passed around – or forgoes mentioning the topic at all – it could indicate that Obama is abandoning his push to wind down the mortgage giants.

But the main crux of Obama’s speech was about how the government could help more “responsible buyers” get into new homes. As such, he introduced an initiative to lower federal mortgage insurance premiums.

Fannie’s 8.25% series S fixed- to floating-rate noncumulative preferreds (OTCBB: FNMAS) were initially up 11 cents, or 2.76%, at $4.10, but closed off 2 cents at $3.97. Freddie’s fixed- to floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 7 cents, or 1.75%, at $4.07.

The paper had been up 12 cents, or 3%, at $4.12 earlier in the session.

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