Vantage Drilling falls as contract nixed; Navistar numbers pressure debt; Bombardier inches up

By Stephanie N. Rotondo

Phoenix, Sept. 2 – While overall liquidity in the distressed debt marketplace remained thin Wednesday, fresh news was pushing around certain names.

Vantage Drilling Co. bonds took a hit after the Cayman Islands-based offshore driller said it had received a contract termination notice from Petrobras America, Inc. and Petrobras Venezuela Investments & Services BV.

Navistar International Corp. was also weaker, following “disappointing earnings,” a trader said. In addition to the dismal numbers, the heavy-duty truck and engine manufacturer said it was facing regulatory actions due to its disclosure practices.

On the upside, Bombardier Inc. paper improved slightly after the company said its Chinese joint venture had won a $381 million high-speed train contract.

Also gaining were Claire’s Stores Inc. bonds as the jewelry retailer reported earnings.

Vantage falls on legal skirmish

Vantage Drilling bonds fell as the company announced “some kind of legal issue,” a trader said.

“It didn’t bode well for the bonds,” he said.

The issue to which the trader was referring was in regards to a contract that had been terminated.

The trader said the 7½% notes due 2019 fell “6 and change [points]” to end at 40¾. The 7 1/8% notes due 2023 declined over 5 points to 41¼.

“As far as I know, the bonds are still trading with interest,” the trader said.

Another trader said the name was “active,” ticking as low as a 38 to 39 context before rebounding to close “around 41.”

Late Tuesday, Vantage said it had received the contract termination notice from Petrobras America and Petrobras Venezuela. The notice alleged that Vantage had breached obligations under its drilling contract, though Vantage claimed there was no explanation as to what the breach was.

Believing that it is in compliance, Vantage said it has filed for arbitration to challenge the termination and to assert that Petrobras wrongfully terminated the contract.

Navistar numbers disappoint

A trader said Navistar International reported “disappointing earnings” Wednesday, which pressured the company’s debt.

He saw the 8¼% notes due 2021 falling 3 points to 84¼.

A second trader said the bonds were “down a couple points,” trading at 84.

For the fiscal third quarter, Navistar posted a net loss of $28 million, or 34 cents per share. That compared to a loss of $2 million, or 2 cents per share, the year before.

The report marked the company’s 12th consecutive quarterly loss.

Revenue meantime fell 11% to $2.54 billion.

Analysts polled by Thomson Reuters had forecast revenue of $2.75 billion.

The company said during its conference call that its efforts to restructure would help the company become profitable and cash-flow positive in 2016.

In addition to announcing the earnings, Navistar said it had received a Wells notice from the Securities and Exchange Commission that recommended taking action against both the company and its former Chief Executive Officer, Daniel Ustian, for violations in regards to disclosures and financial statements.

“While we have speculated for the past three years that such action by regulators was possible, and indeed likely warranted, the long overdue revelations in such detail by the company certainly spooked the market,” wrote Gimme Credit LLC analyst Vicki Bryan in an afternoon comment. “That said, Navistar is, now three years later, a company virtually reborn with credible and capable management, finally, and it must address and resolve the legal consequences of the previous 10 years of hubris and failure.”

Bombardier ticks up

Bombardier’s 7¾% notes due 2020 inched up a touch after the market learned a joint venture had been awarded a high-speed train contract in China.

A trader deemed the issue up a quarter-point at 82 5/8.

The contract was awarded to Bombardier Sifang Transportation, a JV that Bombardier owns 50% in. The $381 million deal requires the JV to supply 15 ultra-high-speed trains to China Railway Corp.

Claire’s improves

Claire’s Stores 9% notes due 2019 pushed higher after the company released its second-quarter results.

One trader saw the notes at 86, calling them up almost 2 points. A second trader also pegged the issue at 86, though he said the bonds were up a deuce.

Net loss for the quarter was $18.9 million, versus $20.6 million the year before. Sales meantime dropped to $347.6 million from $377.8 million.

In terms of same-store sales, U.S. sales improved 0.7%, while European sales fell 5.2%.

Currency issues were blamed for the weaker figures.

“In the near term, unfavorable currency movements and weak traffic trends are likely to weight [sic] on Claire’s Stores’ operating results,” wrote Gimme Credit LLC analyst Evan Mann in a comment published Wednesday.

Goodrich recovers

Goodrich Petroleum Corp.’s 10% series C cumulative redeemable preferreds (NYSE: GDPPC) and 9.75% series D cumulative redeemable preferreds (NYSE: GDPPD) rebounded on Wednesday after the company announced it was privately exchanging 5% convertible senior notes due 2032 for $27.5 million of new 5% convertible senior notes due 2032.

The Cs jumped 30 cents, or 20%, to $1.80, while the Ds gained 22 cents, or 11.7%, to $2.10.

However, a distressed bond trader said he had not seen any activity in the company’s debt.

The preferreds had been losing ground since Monday, when the Houston-based oil and gas company said it was cancelling its dividends.

PREPA restructures debt

Looking to Puerto Rico news, the commonwealth’s state-owned Puerto Rico Electric Power Authority reached an agreement with some of its creditors overnight to cut the company’s $9 billion outstanding debt by a third, according to a statement from the authority.

The deal still must be approved by the authority’s remaining bondholders, but it would cut $670 million of principal and save the authority $700 million of interest and principal payments over five years.

“We will continue to work with the other creditor groups toward a comprehensive agreement that will benefit the people and business of Puerto Rico, and provide a clear path to implement PREPA’s transformation,” Harry Rodriguez, the chairman of the authority’s board of directors, said in a statement.

The news did little to spark interest in PREPA’s debt in the secondary market, but the commonwealth’s 8% notes due 2035 were seen trading heavily Wednesday. The bonds were seen at 74 with an 11.312% yield to maturity at market close after trading between 75.822 and 73.125.

Sheri Kasprzak contributed to this article

© 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.