Intelsat sees losses after directors depart; Peabody active; Rent-A-Center stabilizes after rough Tuesday

By Colin Hanner

Chicago, Oct. 12 – A relatively mild week for distressed debt – possibly due to the Yom Kippur holiday – stayed that way even after the Federal Reserve released the minutes from its September policy meeting.

“It seemed like the market was on a little bit of a breather today,” a trader said.

The minutes indicated that the vote to keep rates steady for the time being was a “close call.” Members of the central bank appeared to have valid arguments both for increasing rates and for keeping them unchanged at 0.25% to 0.5%.

The minutes further indicated that a rate increase come December was highly likely.

One trader pointed to Intelsat SA – particularly the Jackson and Luxembourg holdings – as active. The Caa2-rated Jackson 7¼% notes due 2019 were down “around 1½ to 2” points to 81 from 83, and the Ca-rated Luxembourg notes were down “2 points” to 31½, the trader said.

This comes off the news that Intelsat’s Silver Lake directors Egon Durban and Simon Patterson will resign from its board of directors at the end of the year.

After tumbling on Tuesday, Rent-A-Center Inc. seemed to stabilize and was “not nearly as active,” as one trader put it. After the 6 5/8% notes due 2020 took a hit of 10 points on Tuesday, “price points were right around the same zip code” and traded with an “86 handle” on Wednesday, and the 4¾% notes due 2020 were “pretty quiet.”

Tuesday’s weakness came after the Plano, Texas-based furniture and electronics rental company reported dismal preliminary third quarter results.

The results showed a 12% decline in same-store sales year over year. The company added that U.S. gross profit as a percentage of total revenue would be flat.

The company attributed the weak figures to a new point-of-sale system, citing “system performance issues and outages that resulted in a larger than expected negative impact on core sales.

“While we expect it to take several quarters to fully recover from the impact to the core portfolio, system performance has improved dramatically and we have started to see early indicators of collections improvement,” Robert D. Davis, chief executive officer, said in a statement.

Energy stabilizes

Peabody Energy Corp., which saw one of the highest gains of the day on Tuesday, continued to be “active again” but not as active as it has been in the past few days, a market source said.

That success can be attributed to the approval of required debtor-in-possession lenders to amend milestones, as well as the company receiving the highest contract for metallurgical coal in recent history after Chinese efforts to trim its coal output.

The company’s 10% notes due 2022 traded down a “half-point to a 56 handle,” the source said. Its 6½% notes due 2020 were down three-quarters of a point to 36½.

This was amidst news surrounding the Organization of Petroleum Exporting Countries and their willingness to cut supply, which was exacerbated on Wednesday as the organization reported eight-year highs in September output and a forecasted surplus in 2017 for non-OPEC suppliers.

Oil fell for the second-straight day by more than 1%.

After a downgrade announcement from Moody’s Investors Service for Pacific Drilling SA, including its 5 3/8% senior secured notes to Caa3 from Caa2, and its 7% senior secured notes to Ca from Caa3, a trader said there was limited activity and the sole trade at 42½ was “in line with what the last trade was.”

"PacDrilling's ratings downgrade reflects our extremely negative view of the offshore drilling sector with no near term signs of improvement,” said Moody’s senior analyst Sreedhar Kona in a press release.

© 2015 Prospect News.
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