Distressed bonds little fazed by weak oil prices; Arch Coal rises; Intelsat remains firm post-swap news

By Stephanie N. Rotondo

Seattle, Aug. 31 – Distressed bonds were trending toward the upside in month-end trading, even with a sizeable dip in domestic crude oil prices.

Crude oil prices declined 3.3% to $44.82 a barrel after the U.S. Energy Information Administration reported that crude and refined products rose by 4.5 million barrels last week.

For its part, crude inventories climbed by 2.3 million barrels, well more than the 1.2 million-barrel gain forecast by analysts polled by The Wall Street Journal. Gasoline stocks fell by 700,000 barrels, but analysts were expecting a bigger draw.

But despite the commodity’s softness, energy names weren’t much changed on the day.

California Resources Corp.’s 8% second-lien notes due 2022 were down about half a point to a 67½ to 68 context, according to a market source. Sector peer Chesapeake Energy Corp.’s 8% second-lien notes due 2022 were meantime steady at 95¼ bid, 95½ offered.

In the broader energy space, Arch Coal Inc. paper was heading for higher ground, though there was no fresh news to act as a catalyst.

Arch’s 7% notes due 2019 and 7¼% notes due 2021 closed in a range of 3¼ to 3½, up from 2¾ to 2 7/8 previously.

Away from energy, Intelsat SA continued to draw investors’ attention after the company said Tuesday that it was swapping the remaining $142 million of 6 5/8% notes due 2022 linked to Intelsat Jackson Holdings SA.

However, the 6 5/8% notes were not all that active, according to a market source, though the paper closed up a deuce at 88 bid.

The Jackson unit’s 7¼% notes due 2020 were slightly better, at 77¾ bid, 78 offered, up from 77½. The 7¼% notes due 2019 ended at 80 bid, 80½ offered, compared to 79 bid, 80 offered on Tuesday.

Under the terms of the private exchange, holders will receive $705 of new 8% notes due 2024 plus $120 in cash, if tendered by the early deadline.

After the early deadline – 11:59 p.m. ET on Sept. 12 – holders will receive the same amount of new notes and $100 in cash.

The exchange announcement came just one day after the Luxembourg-based commercial satellite services provider said that talks regarding a debt swap with holders of the 6¾% notes due 2018 had broken down.

On July 15, Intelsat Jackson bought back $673.454 million of the 6 5/8% notes at the discounted price of $687.50 per each $1,000 of notes. Prior to that tender – which was oversubscribed – there were $815.252 million of the notes outstanding.

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