Distressed bond market wanes as energy, commodities slip; SunEdison remains weak

By Stephanie N. Rotondo

Seattle, March 23 – Distressed debt was softening in midweek trading, as energy names got hit by declining crude prices.

Oil and gas bonds were coming in as domestic oil prices declined about 4% for the day, falling below the $40-mark. That weakness was due to the U.S. Energy Administration’s latest inventory report, which showed a 9.4 million-barrel build last week.

On Tuesday, the American Petroleum Institute had forecast an 8.8 million gain, though analysts polled by Reuters had predicted a 3.1 million add.

In response, Denbury Resources Inc.’s 6 5/8% notes due 2021 weakened by 2½ points to 49½ bid, according to a market source.

And, Chesapeake Energy Corp.’s 6 5/8% notes due 2020 dipped a point to 44.

But oil wasn’t the only commodity feeling the pressure on Wednesday. Other commodities, such as steel, were also drifting lower as the dollar gained.

In fact, the dollar hit a one-week high as members of the Federal Reserve indicated that there could be more than just two interest rate increases this year.

Last week, the central bank forecast that only two hikes would occur in 2016, down from December’s forecast of four increases.

With the lower commodity prices, names like AK Steel Holdings Corp. saw their debt decline.

A source pegged AK’s 7 5/8% notes due 2020 at 62½ bid, off a point.

The market continued to pressure SunEdison Inc.’s convertible debt on Wednesday, as expectations of a bankruptcy filing intensified.

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