Equity sell-off weighs on distressed debt; oil, coal names mixed; Caesars, NII continue climb

By Stephanie N. Rotondo

Phoenix, Oct. 22 – The distressed debt market was a little on the mixed side in midweek trading, spurred by an afternoon sell-off in equities.

“Some things fell off a little bit,” a trader said, pointing to “higher-beta” names such as iHeart Communications Inc. “I think people were taking a breather given what was going on with the equities.”

iHeart bonds had been improving after getting beaten down last week, but they just couldn’t hold up.

The trader saw the 14% notes due 2021 slipping to 88½. Another trader echoed that level, deeming the debt down over 2 points.

The second trader also saw the 10% notes due 2018 falling almost a point to 84, in “just a single trade.”

Meanwhile, energy-related names – coal, oil and so forth – were mixed as new data showed that oil supplies continued to be high. That in turn pressured oil prices.

The day’s softness, however, was not necessarily an across-the-board occurrence, as Caesars Entertainment Corp. and NII Holdings Inc. both ended with a firmer feel, even without fresh news to drive the bonds higher.

Energy names mixed

U.S. oil stockpiles continue to mount, new data showed Wednesday, putting more pressure on oil prices.

On that news, the stock market turned south. But in the distressed debt arena, energy related names were mixed.

A trader said Walter Energy Inc.’s 8½% notes due 2021 ended down a point at 28.

However, Arch Coal Inc.’s 7¼% notes due 2021 closed steady at 42½. The company’s 8% notes due 2019 were also unchanged at 71.

The 9 7/8% notes due 2019 inched up half a point to 49¾.

In Alpha Natural Resources Inc. paper, the 6¼% notes due 2021 were seen a point weaker at 53¼, while the 9¾% notes due 2018 were down a deuce at 69.

In the mining sector, Cliffs Natural Resources Inc. was again gaining steam.

A trader said the 4 7/8% notes due 2021 improved over a point to 71¼, while the 3.95% notes due 2018 increased 2 points to 83.

The 4.8% notes due 2020 closed at 71¾, up over half a point on the day.

In more oil-centric names, bonds held up pretty well despite the oil price declines.

Hercules Offshore Inc.’s 7½% notes due 2021 held in at 70¾, according to a trader. That trader also saw Samson Investments Co.’s 9¾% notes due 2020 rising 2 points to 82¼.

The U.S. Energy Information Administration said in its latest report that crude oil supplies increased by 7.11 million barrels in the last month, well over the 2.7 million barrel gain expected by analysts.

The oversupply caused oil prices to decline, with Brent crude slipping $1.51 to $84.71 per barrel. U.S. crude dropped $1.97 to $80.52.

Caesars, NII remain strong

Both Caesars Entertainment and NII Holdings saw more gains in their debt on Wednesday, though there was no fresh news to act as a catalyst.

One trader said there was “pretty heavy volume” in Caesars’ 10% notes due 2018. He called the issue up a touch at 17¼.

Another market source placed the issue at 17 bid, up 1½ points.

NII Holdings’ 7 5/8% notes due 2021 also saw “a myriad of trades,” rising over a point to close around 20¼, a trader said.

The trader also saw the 10% notes due 2016 at 30, half a point higher.

Also, the trader said the 7 7/8% notes due 2019 inched up to 65½, while the 11 3/8% notes due 2019 increased slightly to 66½.

Another trader said there was “no particular news” out on NII Holdings, but noted that “there continues to be negotiations on a restructuring plan,” which could be driving the debt higher.

He saw the 7 5/8% notes at 20½ and the 11 3/8% notes at 66½, “up a point or so.”

Toys’ bonds rise

Toys “R” Us Inc.’s 7 3/8% notes due 2018 were on the move in Wednesday trading.

One trader said the debt surged up 3 points to 63¼. Another source called the bonds 2 points better at 62½ bid.

The Wayne, N.J.-based toy retailer has been embroiled in a controversy of late, one involving action figures from the meth-centered show “Breaking Bad.” Parents expressed outrage that the store would stock their shelves with the character figurines and initially the company said it would not pull the toys from the shelves. However, eventually the company caved and said it would cease selling the items.

Fannie, Freddie firm

Fannie Mae and Freddie Mac preferreds were again dominating trading in that space, as investors pushed the shares into higher territory.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) earned a nickel, or 1.27%, to close at $4 a share. Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) put on 2 cents, closing at $4.02.

Earlier in the week, the agencies said it was nearing a deal with its regulator that would allow banks to accept 3% down from borrowers with less-than-stellar credit. The deal is also expected to include when banks will be required to repurchase loans that turned sour.

The move toward requiring less money down on a new home could be good for buyers, but also for the housing market, which has not yet improved as much as some would have hoped.

However, the deal also has some investors scratching their heads, wondering if the two government-sponsored entities will ever be wound down, as many government officials have proposed.

© 2015 Prospect News.
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