EP Energy up, Stone down; Community Health down amid ACA speculation; Intelsat flies

By Colin Hanner

Chicago, Nov. 16 – Distressed energy bonds teetered on up-and-down oil news and company-related news characterized trading on Wednesday in distressed debt-land, though traders said much of the focus was on new issues in high yield.

“New issues like Weatherford [International] and Bombardier [Inc.] seemed to be the bulk of activity today,” a trader said. “More of the focus on the primary high yield market.”

Yet, EP Energy Corp. and Stone Energy Corp. had headlines during Wednesday’s session, capped by mixed movement in notes for both companies. Crude supplies rose last week, according to a report, but an affirmation to support Organization of Petroleum Exporting Countries supply cuts in the imminent future was made by Russia’s energy minister, Alexander Novak.

Peabody Energy Corp. and CGG SA both saw gains after production in mining had its largest increase in October since March 2014, though the coal sector was quiet on the day.

Valeant Pharmaceuticals International Corp. and Concordia International Inc. continued to mill through trading without much movement in the pharmaceutical realm, while Community Health Systems Inc. treaded after positive sessions earlier this week.

Intelsat SA’s Luxembourg-linked notes continued to soar in several of its notes, though some traders were unsure why.

In coal and oil

A report from the Federal Reserve painted a picture for several names in the coal, oil and natural gas industries.

Production in mining and oil drilling posted a gain of 2.1% in October, its largest increase since March 2014. From October 2015 to last month, mining and oil drilling production is down 7%.

Yet, “coal took a breather” a trader said, adding that the sector as a whole has been active lately but seemed to stall during the session.

CGG SA’s 6½% notes due 2021 were up 1 point to 42½, a market source said.

Peabody Energy Corp. was up ¼ point in its 6½% notes due 2020, which settled around a 61¼ handle.

Oil and gas well drilling saw a 9% gain in October, according to the same report from the Federal Reserve. Year-over-year, oil and gas well drilling was down 31.5%.

Those figures were enhanced by a report by the Energy Information Administration, which said crude oil increased by 1.1% on the week ending Nov. 11, an increase of 5.3 million barrels from the previous week.

That negative shock to the market was upended by firming discussions surrounding an upcoming OPEC conference, which hopes to curb the global glut of oil.

MEG Energy Corp.’s 7% notes due 2024 were up ½ point to 82¾, and California Resources Corp.’s 8% notes due 2022 were up 1 point to 71½, a trader said.

Energy talk

EP Energy announced Wednesday that it plans to repay the outstanding amount under its senior reserve-based revolving credit facility with $350 million of proceeds from a senior secured note offering.

That comes in addition to a plan to price a $500 million offering of seven-year senior secured notes on Thursday, with an 8% to 8¼% yield.

"The proposed notes will boost EP Energy's liquidity and support an increase in capital spending in 2017," Moody's vice president and senior analyst James Wilkins said in a news release.

Several of EP’s notes ticked upward during the session, led by the 7¾% notes due 2022, which were up 5 points to 69, a market source said.

The 6 3/8% notes due 2023 were up 2½ points to 67½, and the 9 3/8% notes due 2020 were up 2¼ points to 79¼ on “40 million trades,” a trader said.

Stone dropping

On Tuesday, Prospect News reported that Stone Energy failed to make an interest payment of approximately $29 million on its 2022 notes due Nov. 15.

A 30-day grace period will extend the latest day for payment until Dec. 15 or a default occurs.

A day later Wednesday, some holders of Stone’s convertible bonds, as well as its 7½% senior notes due 2022, entered into a third amendment of their restructuring support agreement, extending the deadline to Nov. 17 from Nov. 15 for the beginning of solicitation of votes on its pre-packaged plan of reorganization.

The amendment also allows noteholders the option to terminate the support agreement at any time they determine specific employee plans and indemnification provision changes are not acceptable or satisfactory.

Those 7½% senior notes due 2022 were up ¾ point to 57, a market source said.

Another market source had the notes trading with a 57 handle, as well, but only saw a ¼ point increase on the day.

Healthcare and pharma

Valeant Pharmaceuticals International Corp.’s 5 7/8% notes due 2023 were down ¼ point to 78¼ on a “bunch of trades,” a trader said.

The Canada-based pharmaceutical company announced on Tuesday that it has committed to sell off its non-core assets, a move it hopes will allow the company to pay down about $5 billion of its $30 billion debt.

Concordia International Inc.’s 7% notes due 2023 were again unchanged at 38½, but did trade, a market source said.

Its 9½% notes due 2022 were up 1/8 point to 43.

In an about-face in the hospital arena, Community Health Systems Inc. traded down across several notes after rebounding earlier in the week from previous session declines.

The company’s 5 1/8% notes due 2021 were down 2 points to 89 7/8, a trader said. Another trader said the notes were “close to 90,” and were down 1½ points from yesterday’s 91½ handle.

A market source said the 6 7/8% notes due 2022 were “trading in the high 60s.”

The 5 1/8% notes due 2021 were down 1 point to 90½, a market source said.

“There’s not been a lot of price movement [in Community Health],” a trader said. “They trade here and there.”

Intelsat flying

Intelsat’s Luxembourg-linked 6¾% notes due 2018 were up 2½ points to 70½ on heavy volume, a trader said. Another trader also saw the notes hovering around the same handle.

“Something’s got to be driving those particular bonds,” a trader said, though he said he would not speculate on what’s causing the persistent increase.

Round up

For the second consecutive day, CNG Holdings, Inc.’s 9 3/8% notes due 2020 saw gains. The notes were up 5 points to 78, a trader said.

iHeartMedia Inc.’s 9% notes due 2022 were down ½ point to 71¼, a trader said.

Gaming operator Caesars Entertainment Corp’s 12¼% notes due 2019 were up ¾ point to 62½, a trader said, and the 10% notes due 2018 were up ¼ point to 64.

Resolute Forest Products’ 5 7/8% notes due 2023 were down 1¾ points to 76¾, a market source said.

Caroline Salls contributed to this review.

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