Energy sector sees boom amid OPEC speculation; coal down; Community Health and Quorum on the upswing

By Colin Hanner

Chicago, Nov. 21 – A surge in oil lifted some distressed oil and oil-related distressed notes – a sign that the Organization of Petroleum Exporting Countries may be heading toward a supply glut cut deal in just over a week – and several other names saw movement during the start of a shortened trading week on Monday.

Distressed oil and natural gas staples – like California Resources Corp. and EP Energy Corp. – seemed to mirror equities that rose off the speculation that an OPEC accord is nearing and the rise in crude oil futures, which were up almost 5% at the end of the bond market close on Monday.

Offshore oil and natural gas driller Noble Holdings International Ltd.’s distressed notes may have also been benefitting off the energy sector’s sentiment, as well as Noble’s near-complete $4 billion financing with Delek Group Ltd. to develop Israel’s largest natural gas pool, according to a report from Bloomberg.

Another of Noble’s distressed notes was nearly unchanged on the day.

Coal companies Peabody Energy Corp. and Murray Energy Corp. fell again after spot iron ore prices continued to drop over the weekend and into Monday, an effect largely attributable to China’s decision to increase mining operations.

A $425 million asset sale coming out of Community Health Systems Inc. on Friday seemed to lift the notes for the second-consecutive trading day, and its spinoff, Quorum Health Corp., was also up on the day.

“Things are going to start getting slower heading into Thanksgiving,” a trader said, referring to the small amount of heavy-volume trading that occurred on Monday.

Oil mostly up

The fluctuation in oil futures in recent weeks has been resting on the speculation that OPEC countries will reach a supply cut deal in Vienna at the end of November.

That speculation solidified on Monday, as members Iran and Iraq made the deal’s success more apparent, signaling that each country would work toward reaching an agreement.

U.S. West Texas Intermediate and Brent crude futures were up nearly 4% to 4½% at the end of the day’s trading.

California Resource’s 8% notes due 2022 were up 2 points to 74, a market source said, while another trader said the notes were up closer to 2 3/8 points to 74 1/8.

Houston-based EP Energy saw a 1 3/8-point uptick in its 9 3/8% notes due 2020, which settled at 79 3/8. Its 6 3/8% notes due 2023 went out with a 66 handle – down 1 point from Friday’s levels – but traded as high as 70 during intraday trading, a market source said.

A trader said that EP Energy’s 8% notes due 2023 were up 1 point to 101¼.

Also seeing upticks were MEG Energy Corp.’s 7% notes due 2024, which were up 1½ points to 85½, and Denbury Resources Inc.’s 6 3/8% notes due 2021, up ¾ point to 82¾, a market source said.

On Monday, a report said that Noble Energy is nearing financing that would develop the largest natural gas pool in Israel, and one of the company’s distressed notes saw modest movement upward.

A market source said the 3.95% notes due 2022 were up ¼ point to 72 and had been as high as 74 during intraday trading.

Noble’s 8.2% notes due 2045 were unchanged, if not 1 point lower, at 63, a market source said.

Breaking from the market trend on the day were a few oil and natural gas producers that saw modest slips in their notes.

Stone Energy Corp.’s 7½% notes due 2022 were down ¼ point to 57¾, a market source said, and Linn Energy, LLC’s 7¾% notes due 2021 were down ¾ point to 31.

Driller Ocean Rig UDW Inc.’s 6.8% notes due 2038 were down 1½ points to 66½, a trader said.

A market source said GenOn Energy Inc.’s 9½% notes due 2018 were down 1 point to 73.

Coal, down again

Peabody Energy – a distressed name that reflected the surge in coal prices in recent months – now seems to be paralleling its declines.

A market source said Peabody’s 6 ½% notes due 2020 were down 2 points to 54½. Another market source said the notes were trading around a 53 7/8 handle.

Peabody’s 10% notes due 2022 were down 3¾ points to 76¼, and the 7 7/8% notes due 2026 were down 2 points to 53.

A trader said Murray Energy’s 11¼% notes due 2021 were down 2½ points to 71.

Cliffs Natural Resources Inc.’s 6¼% notes due 2040 were down ½ point to 76, a market source said, though they were as high as 78 2/8 and as low as 75 2/5.

Health and pharma

Community Health’s 7 1/8% notes due 202 were up 1 point on one trade to 73¾, a trader said.

On Monday, Moody’s Investor Service said it affirmed the Ba3 ratings on the company's senior secured bank debt and senior secured bonds and Caa1 rating on its unsecured notes, a trading day after the company announced a $425 million sale of assets in Washington.

Quorum Health’s 11 5/8% notes due 2023 were up almost 6 points to 80½.

Amid rising stocks prices and continued talks of asset sales is Valeant Pharmaceuticals International Inc., which seems to be wavering on whether to pull the trigger on several reported billion-dollar asset sales to pay down its existing debt.

A trader said the 6 1/8% notes due 2025 were up 3/8 point to 78.

Round up

iHeartMedia Inc. was up in two of its distressed notes: the 9% notes due 2019, which were up 1 point to 77 1/8, and the 9% notes due 2021, which were up 1¼ points to 73.

Fertilizer manufacturer and distributor CF Industries Holdings, Inc.’s 5.15% notes due 2034 were up ½ point to 85, a trader said.

On Monday, the company announced a reduction in the size of its revolving credit facility to $750 million from $1.5 billion, according to a company news release.

Intelsat SA’s Luxembourg-linked 8 1/8% notes due 2023 were unchanged at 36 and similarly linked 7¾% notes due 2021 were down 1/8 point to 36 1/8.

Teen retailer Claire’s Inc.’s 9% notes due 2018 were up ½ point to 48 5/8, a trader said.

Caesars Entertainment Inc.’s 12 ¾% notes due 2018 were up ¾ point to 62¾.

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