Stock sell-off weighs on distressed debt; oil, coal mixed; Caesars, NII continue to 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.

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.”

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

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