Distressed debt fall continues ahead of Fed; energy names slip; Fannie, Freddie drop more

By Stephanie N. Rotondo

Seattle, Dec. 14 – There was “more fallout” in the distressed debt market on Monday, according to a trader.

But as the space continued to retreat – driven in large part by commodity prices – the trader noted that there was “not a ton of trading” among distressed bonds, though higher-rated junk bonds remained busy.

As for the day’s declines, they were initially spurred by an over 1% drop in crude oil prices, which sent the commodity to levels not seen in seven years. However, prices began to rebound, eventually ending up 1.74% for the day.

In the day’s dealings, Chesapeake Energy Corp. was resuming its downward slide along with the weaker market.

“It continues to get beat up,” a trader said. “They are just getting slaughtered.”

The trader saw the 6½% notes due 2017 falling to 57½ from 62 on Friday. The 3¼% notes due 2016 meantime hit lows with a 93 handle, which compared to a 96 handle on Friday.

As for longer-dated issues, they were trading in the high-20s, the trader said.

Meanwhile, Fannie Mae and Freddie Mac paper continued to drop Monday, “probably on some chatter about a bill in the Senate that would basically force the Treasury to hold them in conservatorship” barring congressional approval.

Both Fannie’s 8¼% series S fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FNMAS) and Freddie’s 8 3/8% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) declined 20 cents, or 5.41%, to $3.50.

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