Distressed paper seen better amid general market upturn; Intelsat, Whiting extend rebound

By Paul Deckelman

New York, Feb. 26 – They say a rising tide lifts all boats – and that venerable adage was certainly true in the distressed debt market on Friday.

Traders saw many recently challenged issues trading better, amid an overall strong showing by the broader high-yield market.

Intelsat SA extended its rebound from losses posted earlier in the week to a third straight session, with volume in the communications satellite company’s paper remaining high.

Whiting Petroleum Corp.’s bonds were also once again better, building on Thursday’s snapback from losses seen earlier in the week, but volume was only moderate.

Also in the energy arena, there was notable activity in Devon Energy Corp. paper.

Hornbeck Offshore Services, Inc.’s bonds rose as the company amended and extended its revolving credit agreement.

In the convertibles market, Chesapeake Energy Corp.’s paper was ending the week on a strong note, extending the gains seen earlier in the week.

Its junk bonds were also generically better, though on limited trading.

Intelsat gains continue

Traders saw a continued resurgence in the bonds of Luxembourg-based communications satellite operator Intelsat – whose bonds had gotten beaten down in heavy trading on Monday and again on Tuesday after the company released disappointing preliminary fourth-quarter and full-year revenue numbers and other operating metrics, put out 2016 guidance below what some in the market were looking for and announced the hiring of Guggenheim Securities to help it assess possible balance sheet transactions.

A trader saw the company’s Intelsat Jackson Holdings SA 7¼% notes due 2020 up 3 points on the day, going home at 70½ bid, with about $30 million traded.

He saw its 7¼% notes due 2019 pushing up to 79 bid, calling that a gain of 6 points, with over $24 million traded, while its Intelsat Luxembourg SA 7¾% notes due 2021 were 5 points better on the day at 30 bid, with over $20 million having changed hands.

“Intelsat rallied a bunch again,” a second trader opined, seeing the Intelsat Jackson 2019s as 5 points better at 79 and the Intelsat Luxembourg 2021s up 5 points to 30 bid, “so they staged a nice little rally.”

“The Jackson ’19s were at 87 last Friday. They were down about 15 to 20 points at their lows. They’re still down 8 points on the week – but they clawed their way back from their lows by about a dozen points.”

He meantime said that “the LuxCo bonds managed to come back by around 8 points from their lows.”

Whiting rebound continues

Another comeback story seen this week was Whiting Petroleum; the Denver-based oil and natural gas exploration and production operator’s bonds were hammered down by more than 5 points on Tuesday and continued to erode on Wednesday, before finally turning the corner on Thursday and starting to bounce back,

A trader saw its 5% notes due 2019 going out at 46½ bid, calling it a 3½ point gain on the day, with around $9 million traded.

He said that its 5¾% notes due 2021 were likewise 3½ points better at 46 bid, with about $10 million traded.

Its 6½% notes due 2018 were 3 point gainers on the day, ending at 36 bid, though on only $3 million of volume.

“There was more pounding on the way down,” he noted.

Whiting had a good day on the rebound – but on not as much volume.”

A second trader saw the 6½s go to 36 bid on Friday from 32 on Thursday and 28 on Wednesday, “so they had a little bit of a rally.”

Devon busily traded

Also among the energy credits, a trader said “Devon Energy was a name I saw that popped up today, on a lot of volume, right at the top of the charts.”

He said that the Oklahoma City-based company’s bonds “weren’t active traders for the past week or so – but they lit up today, volume-wise.” He was unaware of any fresh news about the company that might account for the increased activity.

He saw Devon’s 6.30% notes due 2019 unchanged at 95 bid, with over $40 million having traded.

Its 3½% notes due 2022 lost 1 point on the day, easing to 76 bid, with over $33 million changing hands.

Devon’s 5% bonds due 2045 were about unchanged at 65½ bid, with over $20 million of volume.

Hornbeck hops on loan change

A market source saw Hornbeck Offshore services’ 5 7/8% notes due 2020 up 6 3/8 points on the day at 52¼ bid.

He noted the announcement, contained in a regulatory filing, that that the Covington, La.-based provider of offshore supply vessels to the energy industry had extended and modified some covenants of its $300 million revolving credit facility.

That revolver now matures in February 2020, although there is a provision that if the company’s 2019 convertible senior notes remain outstanding on March 1, 2019, then Hornbeck is required to maintain a specified minimum liquidity level until after the redemption or refinancing of the convertibles, which mature on Sept. 1, 2019.

The re-stated facility’s interest is Libor plus 200 basis points to 300 bps, based on a new total debt-to-capitalization ratio added under the amendment. Commitment fees of 37.5 bps to 50 bps are based on the same ratio.

The amendment also reduced the collateral coverage of the revolver, according to the filing.

The revolver was undrawn as of Friday.

Chesapeake converts strong

In the convertibles market, Chesapeake Energy’s paper was ending the week on a strong note.

The Chesapeake 2.5% convertibles and 2.25% convertibles were both up a point or more, extending gains notched Wednesday after the bonds jumped on news that the Oklahoma City-based natural gas company is buying back debt and taking other measures to conserve cash and improve its balance sheet.

The Chesapeake 2.5% convertibles due 2037 traded up to 44.625 on Friday after ending the session on Thursday at 42.75. That was up from 35 before earnings news was announced on Wednesday.

A junk bond trader meantime said that Chesapeake’s new 8% senior secured second-lien notes due 2022 were 1 point better at 39 bid, but “only on a couple of prints.”

Penney pops up

Away from the energy world, a trader said that “J.C. Penney [Co. Inc.] bonds had a nice rally,” after Moody’s Investors Service lifted the Plano, Texas-based department store operator’s corporate family rating to B3 from Caa1 previously.

Standard & Poor’s meantime put the company’s CCC+ corporate credit rating on CreditWatch with positive implications.

He saw the 6 3/8% notes trading around 73 bid, calling that and 8 or 9 point jump.

Another market source saw the company’s 5.65% notes due 2020 at 91½ bid, up 6¼ points on the day.

iHeart shows improvement

Elsewhere, a trader said that “iHeart [Media Inc.] continued to creep up – they were up another 1 to 2 points.”

He cited the San Antonio, Texas-based media company’s earnings, which had come out a day or two ago.

He saw its 10% notes due 2018 up 1 or 2 points, ending at 32 bid.

“It was the same thing” with the 14% notes due 2021, which he called up 1½ points at 23 bid.

-Rebecca Melvin contributed to this review

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