Distressed bonds softer despite positive GDP; 21st Century pops on new financing; Cliffs down

By Stephanie N. Rotondo

Phoenix, Sept. 26 – The distressed debt market finished with a weak tone yet again Friday, even as most markets turned positive after new GDP data indicated that the U.S. economy grew at its fastest pace in more than two years.

The distressed space was more shaken by news Bill Gross was leaving Pimco for a competitor, Janus Capital Group.

Gross’ departure comes as Pimco has suffered from massive outflows. Chatter is that Pimco was even considering firing Gross before he resigned.

But the market, though it remained weak, did show signs of rallying.

“It was very heavy in the morning,” one trader said. “But everything seemed like it was going to bounce a little bit.”

21st Century Oncology’s notes got a huge boost at the end of the week on news the company had received a $325 million investment. The company plans to use some of the proceeds to pay down debt.

However, positive news was not helpful to Cliffs Natural Resources Inc. The company has reportedly received some interest on its Australian assets as the company looks to shed non-core businesses.

21st Oncology raises new funds

21st Century Oncology received $325 million in new funds on Friday, as the company privately placed series A convertible preferred stock with Canada Pension Plan Investment Board.

On the news, the Fort Myers, Fla.-based company’s debt gained, massively for some tranches. A trader said the 8 7/8% notes due 2017 had a “smart rebound,” moving up to 103¼ from par.

“A little liquidity never hurts,” the trader mused.

But it was the 9 7/8% notes due 2017 that really posted large gains, jumping 18 points to 98½, he said.

Another trader said the 9 7/8% notes were “up huge,” closing in a 99 to par context, versus levels around 80 before.

The 8 7/8% notes were pegged at 103½ bid, 103¾ offered, up from par.

The radiation therapy services company sold 385,000 of the 9.875% convertible preferreds to the investor, who also got $30 million of 10-year warrants.

Proceeds will be used to pay down a revolving credit facility, to repay obligations under the South Florida Radiation Oncology credit facilities, to repay other debt and capital leases, to provide capital for near-term strategic initiatives and for general corporate purposes.

The equity investment replaces a previously announced recapitalization agreed with noteholders that would have converted 72% of the company’s outstanding subordinated notes into 95% of its equity.

Cliffs’ bonds tank

Cliffs Natural Resources’ Australian assets – iron ore mines in Western Australia – have reportedly attracted some interest from companies like Mineral Resources Ltd. and Mount Gibson Iron Ltd., according to news reports.

But the news failed to stem the company’s recent string of losses, as the bonds were again diving on Friday.

One trader said the 4.8% notes due 2020 were off 6-plus points around 74, while the 6¼% notes due 2021 dropped 3 ¾ points to 70.

Another trader placed the 4.8% notes in the mid-70s, which were “down a bunch more, another 5 points.” The 6¼% notes were seen in the lower 70s, down from 80.

“It keeps getting hit,” the trader said.

The Australian mines are thought to be valued at as much as A$1 billion.

Cliffs has been looking to sell its Australian assets, as well as its U.S. coal assets as it deals with declining iron and coal prices.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.