Peabody bonds fall as lenders hire legal counsel; AK Steel soft; Intelsat drops; Abengoa jumps

By Stephanie N. Rotondo

Phoenix, Sept. 24 – The distressed debt market retreated again on Thursday, continuing a trend seen for most of the week.

“Just a lot of stuff was weaker today,” a trader said.

Another trader noted that there was “a huge bid list out there in high yield,” adding that as a result, “there was a heavy tone to a lot of stuff.”

Peabody Energy Corp. bonds were coming in after it was reported late Wednesday that the company’s senior lenders had hired legal counsel to advise them in a potential restructuring.

Also in the commodity space, AK Steel Holdings Corp. continued to be soft.

Intelsat SA was also among the day’s losers. The bonds began to drift down on Wednesday on news the company had hired Goldman Sachs & Co. to explore potential asset sales.

While most of the distressed arena was down, Abengoa SA paper got a huge boost – anywhere from 15 to 30 points – as the Seville, Spain-based renewable energy company laid out a capital plan and said that it had signed on underwriters for a €650 million share sale.

Peabody debt declines

A trader said Peabody Energy bonds “continue to weaken,” seeing unsecured paper – such as the 6½% notes due 2020 – falling to 20 as the 6% notes due 2018 declined to 26.

Another trader said the 6% notes lost a point, closing at 26. The 6½% notes were seen at 20½, off 2½ points.

A third market source pegged the 6½% notes at 20½ bid, down 1½ points.

However, the stock (NYSE: BTU) ended up 28 cents, or 24.78%, at $1.41. The equity’s gains were attributed to news that senior lenders – the backers of a $1.17 billion term loan – had hired Davis Polk & Wardwell LLP to represent and advise them in restructuring talks.

AK Steel still weak

AK Steel debt remained under pressure in Thursday trading.

“A lot of the steels were lower again,” a trader said, noting that even higher-grade names such as ArcelorMittal took a hit.

The trader said AK Steel’s 8 3/8% notes due 2022 fell a point to 54, while the 7 5/8% notes due 2021 slipped a touch to 56.

“They were kind of active,” a second trader said the name, placing the 2021 issue in a 54 to 55 context.

On Tuesday, the World Steel Association put out a report that showed global steel output had declined 3% in August, the fourth consecutive months of declines. Among domestic producers, output was off 10%, due in part to cheaper imports flooding the market.

Intelsat falls

Intelsat continued to lose ground on Thursday following news out on Wednesday indicating the company was looking at selling off assets to deal with its high debt load.

A trader said the 7¾% notes due 2021 were off “another 1½ points,” trading in a 67½ to 68 context. A second market source placed the 6 5/8% notes due 2022 at 81½ bid, down 3 points.

It was reported Wednesday that Intelsat, the world’s largest commercial satellite operator in terms of revenue, had hired Goldman Sachs to explore potential asset sales. With about $14 billion in debt and annual revenues of about $2.4 billion, the company is hoping the sales will help relieve some of the debt burden.

Abengoa pops

Abengoa bonds got a boost Thursday after the renewable energy company said it had lined up creditors to backstop a €650 million share sale.

Additionally, the company held a conference call during the session to discuss a broader capital plan aimed at improving the company’s bottom line.

Abengoa also announced the departure of its executive chairman, Felipe Benjumea. Benjumea’s father founded the company and the son has held his position for the last 25 years.

A Reuters report, citing “one source with knowledge of the negotiations,” said that Benjumea’s departure “clears the horizon for the company as it signals a change of culture.”

All the news combined to give the company’s debt a hefty hike.

A trader said the 7¾% notes due 2020 rose 15 points to 55, as the 7 7/8% notes due 2018 jumped over 30 points to 31¼.

“That looks accurate,” he said. “Holy cow.”

Santander, HSBC and Credit Agricole have lined up to underwrite the share sale. Shareholders Inversion Corporativa and Waddell & Reed will participate in the sale, investing at least €120 million and €65 million, respectively.

During the conference call, company management said it would raise as much as €2.2 billion via the share sale and potential asset sales.

Millennium Health firms

Millennium Health LLC’s term loan B rose in the secondary market following the emergence of reports that the company may file for bankruptcy and give creditors control of the company, according to a market source.

The source said he saw one trader quoting the loan at 41 bid, 46 offered, up from 33 bid, 38 offered on Wednesday, and another trader quoting the paper at 37 bid, 42 offered.

“Millennium is a name that is quoted a lot more than it trades, so unless you talk to honest traders it’s hard to build a narrative around price runs,” the source added.

Millennium is a San Diego-based specialty diagnostics laboratory.

Sara Rosenberg 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.