By Paul Deckelman
New York, Feb. 25 – Distressed-debt traders said that their market was generally better on Thursday, in line with a generalized rise in the larger high-yield bond market.
Traders said that Intelsat SA’s bonds were higher across the board in very active dealings, as the communications satellite company’s paper continued to recover from the beating that it took during the first two days of the week on less-than-stellar preliminary revenue numbers and guidance. It was also hurt by investor nervousness about the company’s having hired an adviser to assess financing and balance-sheet alternatives.
Another recently battered name – Whiting Petroleum Corp. – also turned northward on Thursday after having been beaten down earlier in the week on disappointing numbers.
There was some activity in Chesapeake Energy Corp.’s bonds, which were unchanged to higher.
The company’s convertible paper meantime saw some rough sledding early on but had recovered late in the day to end about unchanged.
Among international names, Petroleos de Venezuela SA’s paper was better, with traders citing news reports about the Venezuelan state oil monopoly engaging in debt talks with its banks.
Intelsat improvement continues
For a second session in a row, Luxembourg-based Intelsat SA’s bonds were seen firming, in sharp contrast to their pronounced slide earlier in the week.
A trader said that as had been the case in the previous three sessions this week “they were at the top of the charts,” volume-wise.
He saw “a boatload” of the company’s Intelsat Jackson Holdings SA 7¼ % notes due 2020 traded, estimating the volume at over $35 million.
He saw them at 67½ bid, 68 offered, calling that up 1½ points from Wednesday’s finish.
The company’s Intelsat Luxembourg SA 7¾% notes due 2021 were “up a couple of points” at 25¼ bid, with over $22 million traded.
Another trader said those bonds had improved by over 3½ points, seeing them finishing at 26 bid.
“It’s nice when things stop going down,” he said, noting the sharp drop in the bonds at the beginning of the week.
“Intelsat has been all one way or the other this week,” a second trader said.
For instance, the 7¼% notes due 2020 had plummeted some 9¼ points in heavy trading on Monday and fell another 8½ points on Tuesday, then gained ¾ point on Wednesday.
The 7¾s of 2021 were 10¼ point losers on Monday, dropped another 4 points on Tuesday and were down another 1 point Wednesday before finally braking their slide on Thursday.
The company’s bonds, and its New York Stock Exchange-traded shares, got hammered starting Monday after the company issued its preliminary numbers for the fourth quarter and full fiscal year ended Dec. 31.
Quarterly revenues of $571.26 million were down 7.7% year-over-year from $619 million in the comparable 2014 fourth period. Analysts had been estimating just under $576 million. Full-year revenues were $2.352 billion, about in line with the estimates but down from $2.47 billion last year.
Intelsat also issued full-year 2016 revenue guidance of $2.14 billion to $12.22 billion, down from expectations of around $2.29 billion. Adjusted EBITDA is expected to come in around $1.625 billion to $1.675 billion.
Intelsat also announced on Monday that it had retained Guggenheim Securities to assess what it called “financing and balance-sheet initiatives” – but company executives declined to say what these were, although they indicated that the hire was not a prelude a merger or acquisition transaction or to a Chapter 11 bankruptcy restructuring.
Whiting turns the corner
After three consecutive sessions on the downside, “Whiting [Petroleum] was pretty active and was feeling better,” one of the traders said.
He quoted the Denver-based oil and natural gas exploration and production company’s 5% notes due 2019 “up a couple of points” at 42¾ bid, on volume of more than $30 million.
While those bonds had gained ½ point on Monday, they had nosedived by 5½ points on Tuesday and lost another 1½ points on Wednesday.
He saw the 5¾% notes due 2021 at 42¼ bid, calling that 3 points better on the day, on volume north of $25 million.
And the company’s 6¼ % notes due 2023 were ending at 21½ bid, up 3 points, with over $16 million having changed hands.
Chesapeake bonds busy
Another active name from the energy patch was Chesapeake Energy, whose 8% notes due 2022 were ending the day at 38¼ bid, about unchanged, though with over $23 million traded.
Its 3.872% notes due 2019 gained 1¼ points to 19¼ bid, on volume of over $12 million.
Chesapeake converts hanging in
Chesapeake’ 2.5% convertibles meanwhile recovered to end about unchanged on the day after slipping back a point or so in early trading. The Chesapeake common shares retraced about 5% of the prior day’s 23% gain. The Wednesday increases were based on news of debt buybacks and other measures being taken to conserve cash and improve its balance sheet.
The Chesapeake 2.5% convertibles due 2037 ended the session at around 42.75 after earlier trades at 41.25 and after rising 30% on Wednesday to 43 from 33.
The debt news was part of the Oklahoma City-based oil and natural gas exploration and production company’s quarterly results, which revealed how difficult things have been for the borrowing-laden energy producer as commodity prices remain lower for longer than expected.
| Fitch Ratings said it downgraded Chesapeake’s long-term issuer default rating to B- from B and said the outlook remains negative.
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| Fitch said the downgrade reflects the company’s heightened liquidity risk given the prospect for a lower and longer price recovery profile. The rating also reflects the potential for low hydrocarbon prices, which might negatively impact the company’s plans to raise liquidity through asset sales, the agency said.
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| This increases the prospect that the company might more quickly and heavily rely on its revolving credit facility to fund upcoming debt maturities, Fitch said.
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| The ratings also consider the company’s considerable size with the potential for more liquids-focused production, substantial asset base and strong operational execution and flexibility, Fitch said.
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| PDVSA paper better
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| On the international front, a trader said that PDVSA’s notes were among the day’s busiest, “up on talk of them settling with their banks.”
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| He quoted Venezuela’s state-run oil cartel’s 8½% notes due 2017 up 1½ points to 47 bid, with over $34 million traded.
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| He said its 6% notes due 2024 were likewise up 1½ points at 30½ bid, on volume of over $33 million.
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| Its 5 3/8% bonds due 2027 were ¾ point better at 30 bid, on $22 million of volume.
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| PDVSA said earlier this week that it was in talks with international banks on a possible debt refinancing.
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| It has more than $10 billion in bonds scheduled to mature this year, when its finances are severely constrained by the fall-off in revenues due to sagging world energy prices.
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| PDVSA officials have said they are making every effort to avoid the possibility of a default on those bonds.
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| -Rebecca Melvin contributed to this review
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