Trouble In The Bonds Pits: Energy Junk Plunging, M&A Deals Flying

Commodities had once again an ugly week. Copper hit the lowest level since June 2009. Gold dropped below $1,100 an ounce. Other metals dropped too. Agricultural commodities fell; corn plunged nearly 7% for the week. Crude oil swooned, with West Texas Intermediate dropping nearly 7% to $47.97 a barrel, a true debacle for energy junk-bond investors.

It was the kind of rout that bottom fishers a few months ago apparently didn’t think was possible.

For example, in March, coal miner Peabody Energy had issued 10% second-lien notes due 2022 at 97.5 cents on the dollar. Now, these junk bonds are trading at around 49 cents on the dollar, having lost half their value in four months, and 17% in July alone, according to SP Capital IQ’s LCD HY Weekly. Yield-hungry fund managers that bought them at issuance and stuffed them into their bond funds that people hold in their retirement accounts should be sued for malpractice.

Other bonds too have gotten slaughtered in July.

Among the bonds: Cliffs Natural Resources down 27.6%, SandBridge down 30%, Murray Energy down 21.2%, and Linn Energy down 22.3%, according to Bloomberg.

For example, Linn Energy 6.25% notes due in 2019 were trading at 78 cents on the dollar

Read more ... source: Bitcoin Warrior