SandRidge declines on new issue; Cliffs Natural sees late-day weakness; coal sector stays soft

By Stephanie N. Rotondo

Phoenix, May 29 – Distressed bonds were weaker Friday following yet another round of weak economic data.

The federal government cut its gross domestic product estimate to -0.7% per year from the 0.2% gain forecast last month.

A trader said the data was “not supporting an interest rate increase in September.”

Additionally, the Chicago PMI declined to the lowest levels since February.

While the GDP data was taken with a bit of a shrug, the manufacturing index’s decline in May was seen as a bigger deal. The market had been hoping for a higher figure following a weak first quarter.

Commodities were taking the bulk of the hits.

Oil producer SandRidge Energy Inc. was softening on the heels of the company’s new issue, which priced Thursday.

In the iron ore space, a trader said Cliffs Natural Resources Inc. was coming in late in the day, though he saw no fresh news to act as a catalyst.

And as for the coal market, it remained under pressure.

Still, there was some strength in the market, as MagnaChip Semiconductor Corp. saw its debt rise following its earnings release on Thursday.

SandRidge weakens

Following the $1.25 billion sale of 8¾% senior secured second-lien notes due 2020, SandRidge’s older issues were on the decline.

One trader saw the 7½% notes due 2023 falling 1½ points to 57, while the 7½% notes due 2021 dropped nearly 2 points to 57¾.

Another market source deemed the 2021 paper off 2 points at 58 bid.

As for the new issue – which priced Thursday – it “struggled a little bit,” a trader said.

He saw the issue going out in a 99 to 99½ context. However, he noted that the bonds bounced up from lows around 98½.

The Oklahoma City-based company will use proceeds to pay down its revolver and for general corporate purposes.

Cliffs comes in

A trader said Cliffs Natural bonds “seem to be trading off at the end of the day.”

However, he was unclear what was causing the shift.

The trader saw the 6¼% notes due 2040 at 47 bid, down 2½ points. The 5.9% notes due 2020 traded down to 57 bid, which was off “nearly 3 points” on the day.

As for the company’s 7¾% notes due 2020, they ended a point weaker at 69.

Another trader said the 7¾% notes “looked lower,” pegging them in the high-60s.

Elsewhere in the iron arena, FMG Resources’ 6 7/8% notes due 2022 declined a deuce to 77 bid, according to a market source.

Coal depressed

Coal bonds continued to be weak as there appeared to be no end in sight for depressed coal prices.

In Alpha Natural Resources Inc. paper, a trader saw the 6% notes due 2019 slipping half a point to 15. At another shop, the 6¼% notes due 2021 were seen almost a point lower at 14¼.

Peabody Energy Corp. was also lower, its 6% notes due 2018 dipping a quarter-point to 71¾ and the 10% notes due 2022 falling a similar amount to 77¼, according to one trader.

Another market source saw the 6½% notes due 2020 half a point weaker at 52½ bid.

Arch Coal Inc. bonds, however, were mixed on the day.

A trader said the 7¼% notes due 2021 were up a quarter-point at 18¼. The 7% notes due 2019 were also higher, rising half a point to 19.

But the 7¼% notes due 2020 fell half a point to 30¼.

MagnaChip rises

While most of the market was experiencing a downturn, MagnaChip’s 6 5/8% notes due 2021 were up 3 to 4 points following earnings, a trader said.

The trader pegged the issue at 77.

For the quarter ended March 31, the Seoul, Korea-based semiconductor manufacturer posted a narrower net loss of $20 million, or 59 cents per share. That compared to a net loss of $21.6 million, or 63 cents per share, the year before.

Adjusted net loss was $9.6 million, or 28 cents per share.

Revenue was about flat year over year at $164.9 million.

Cash and equivalents totaled $91.4 million at the end of quarter.

© 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.