GEO, CoreCivic notes trade mixed on downgrades; energy soft; Hertz, Mallinckrodt up

By Cristal Cody

Tupelo, Miss., March 25 – GEO Group Inc.’s bonds edged up on Thursday on the heels of a second downgrade.

The company’s 5 1/8% senior notes due 2023 (B1/B-) rose ¼ point to 88¾ bid, according to a market source.

GEO’s 6% senior notes due 2026 (B2/B-) also improved ½ point to 72 bid in heavy secondary trading.

Moody’s Investors Service said Thursday it dropped the company’s rating to B2 from B1, citing a potential revenue and earnings loss as federal agencies cease using private prison operators.

S&P Global Ratings dropped the company’s ratings by two notches on Wednesday, citing potential difficulty in paying or refinancing $1.7 billion of debt maturing in 2024, as well as debt due in 2022 and 2023.

In January, president Joe Biden instructed the U.S. Department of Justice to not renew contracts with privately operated prison operators.

GEO announced in January that the federal contract for the company’s Pennsylvania-based Moshannon Valley Correctional Facility, which generated about $42 million in annual revenue, will expire on March 31.

Moody’s also downgraded CoreCivic, Inc., formerly known as the Corrections Corp. of America, to Ba2 from Ba1 on Thursday.

S&P cut the rating on the company by one notch to BB- on Wednesday over the operating environment and about $1 billion of debt that starts maturing in 2023.

CoreCivic’s 4¾% notes due 2027 (Ba2/BB-) softened ½ point to 89 bid in secondary trading on Thursday, a market source said.

Transocean, Gran Tierra dip

Overall market tone was mixed.

The iShares iBoxx High Yield Corporate Bond ETF improved 15 cents, or 0.17%, to $86.65.

Oil futures declined during the session after recovering on Wednesday.

North Sea Brent crude oil futures for May deliveries fell $2.46 to settle at $61.95 a barrel.

West Texas intermediate crude oil futures for May deliveries settled down $2.62 at $58.56 a barrel.

Distressed bonds in the energy space were mostly softer on light trading action, according to a market source.

Steinhausen, Switzerland-based offshore driller Transocean Inc.’s 7½% senior notes due 2026 (Ca) fell 1¾ points to 60¾ bid.

Calgary, Alta.-based oil and gas explorer Gran Tierra Energy Inc.’s 7¾% senior notes due 2027 (/B-/CCC) declined more than 1 point to the 83 bid area on Thursday.

Talen flat, Nine Energy weak

Meanwhile, Talen Energy Supply LLC’s 6½% senior notes due 2025 (B3/CCC+/B) were mostly unchanged at 81¼ bid, a market source said.

The Allentown, Pa.-based power company is among energy companies impacted by the February winter storm that hit Texas and the central and southern United States.

Houston-based oilfield services company Nine Energy Service, Inc.’s 8¾% notes due 2023 (Caa2/D) were not active Thursday after trading in heavy supply in the prior session at 30 bid to 32 bid, a source said.

The notes were last seen active in the secondary market in mid-March at 50½ bid.

Nine Energy reported March 8 that it expects to generate a net loss and negative adjusted EBITDA for the first quarter following major shutdowns within all its Texas service lines due to the winter storm.

Houston- and Princeton, N.J.-based NRG Energy Inc. reported a week ago that it expects an estimated $750 million loss due to the Texas winter storm and withdrew its 2021 guidance due to new resettlement data from the Electric Reliability Council of Texas.

Newark, N.J.-based energy supplier Genie Energy Ltd. reported the spot energy prices soared from a usual $50 per megawatt hour to $9,000 per megawatt hour, while San Antonio electric utility CPS Energy has filed suit against Ercot for charging excessive prices during the storm.

CPS reported on Wednesday that it also has filed lawsuits against many of its natural gas suppliers over exorbitant natural gas charges during the winter storm.

The company said certain suppliers charged it up to 15,000% more for supply during the storm.

Several energy companies have filed for Chapter 11 bankruptcy due to the winter storm, including Griddy Energy LLC and Brazos Electric Power Cooperative Inc.

Hertz continues gains

Bankrupt rental company Hertz Corp.’s 5½% notes due 2024 were quoted up 3 points at 95 bid on Thursday afternoon in strong secondary supply, a source said.

The notes are trading 5 points better than in the same session a week ago and nearly 20 points higher since the end of February.

Hertz is nearing an exit from Chapter 11 bankruptcy after filing in May 2020.

On March 2, the Estero, Fla.-based car rental operator filed a joint Chapter 11 bankruptcy plan of reorganization and reported it received a $4.2 billion buyout offer from Knighthead Capital Management, LLC and Certares Opportunities LLC.

A hearing on the offer is scheduled for April 16 in the U.S. Bankruptcy Court for the District of Delaware.

Mallinckrodt stronger

Meanwhile, bankrupt pharmaceuticals maker Mallinckrodt plc’s bonds continued to climb higher on Thursday, a market source said.

The company’s 5¾% senior notes due 2022 jumped 3 points to 67 bid.

Mallinckrodt filed for Chapter 11 bankruptcy in October in the U.S. Bankruptcy Court for the District of Delaware.

The company announced March 10 that it has reached an agreement with first-lien term lenders holding about $1.3 billion of its outstanding first-lien term loans to support its restructuring support agreement.

Mallinckrodt received approval on Feb. 25 to extend filing a bankruptcy restructuring plan until Aug. 9.

Diamond Sports drops

In other distressed secondary trading, Diamond Sports Group LLC’s bonds were weaker on Thursday, a source said.

The company’s 6 5/8% senior notes due 2027 (B3/CCC-) dropped 2 points to 55 bid in thin secondary volume.

Parent company Sinclair Broadcast Group, Inc. reported in February soft guidance for the sports broadcast group and an interest in liability management initiatives that could include a debt exchange or redemption.

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