Commodity names drive distressed bond market higher; Fannie, Freddie preferreds in focus

By Stephanie N. Rotondo

Seattle, June 9 – The distressed debt market closed with a positive tone yet again on Thursday, with commodities leading the way.

AK Steel Holdings Corp. continued to post sizeable gains in trading, with one market source seeing the 7 5/8% notes due 2020 jumping 3˝ points to 87.

The issue was up over 2 points on Wednesday.

On Thursday, the West Chester, Ohio-based steel manufacturer said in a regulatory filing that reducing its debt burden was its “top financial priority.” The company is aiming to reduce its debt by $700 million through refinancings and debt repurchases.

In the energy space, Chesapeake Energy Corp.’s 6 5/8% notes due 2020 ticked up half a point to 77 bid – even as oil prices dropped over 1% and S&P cut the company’s rating to SD.

For its part, oil prices came down from their recent highs over the $51 mark, as global growth concerns pushed investors into safer investment options.

As for S&P’s rating change, the agency said it was due to Chesapeake’s recently announced debt exchange of issues maturing or becoming putable in 2018 through 2022.

Trading in Fannie Mae and Freddie Mac preferreds continued to be busy in Thursday trading.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were slightly better at $4.7323, with nearly 1.7 million of the shares trading. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were steady at $4.65, on about 1.27 million shares trading.

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