Intelsat solidifies exchange talks; Peabody up after paying DIP in full; energy firm after oil pares

By Colin Hanner

Chicago, Dec. 5 – It was a lackluster start to the week in the distressed high-yield arena, according to several traders, and several showstoppers from last week’s trading continued to trade, albeit with much smaller volume.

“More of the attention was on newer deals,” a trader said, referring to newer issues in the regular high yield market.

A trader said there was “not even $2 billion [notes] traded in high yield overall” on Monday but pointed toward Intelsat SA’s Jackson- and Luxembourg-linked bonds as a bond of appeal, especially on top of news that the communication satellite company agreed to exchange new notes for existing senior notes.

One trader said that news from Friday surrounding Peabody Energy Corp. finally settled in the markets on Monday, with several of its notes trading up. On Friday, the St. Louis-based company requested court approval to repay its debtor-in-possession financing obligations in full before the scheduled maturity date.

Murray Energy Corp. followed suit in the coal space.

Oil futures were coming off a three-day stretch of unparalleled gains, topping the $50-per-barrel mark, but slowed to the point of declines at the start of the new week.

Yet, distressed energy staples, like California Resources Corp., Linn Energy, LLC and MEG Energy Corp., continued to reap the benefits stemming from a supply-cut accord last Wednesday.

In healthcare, Community Health Systems, Inc. continued to tick upward, with a trader saying the notes in question saw several-point gains for the second-straight session.

Up like a satellite

At the end of last week, Intelsat SA was in discussions with noteholders to exchange three sets of senior notes for a new issue bond, and those notes in questions responded during market trading.

On Monday, those discussions were solidified, as the satellite company agreed to exchange new 12½% senior notes due 2022 plus cash for some of its 6¾% senior notes due 2018 in a private transaction and to exchange new 12½% senior notes due 2022 plus cash for some of its 6¾% senior notes due 2018, 7¾% senior notes due 2021 and 8 1/8% senior notes due 2023 in a separate agreement.

As part of the terms of the agreements, Intelsat will extend exchange offers to some eligible holders of the notes, according to a 6-K filing with the Securities and Exchange Commission.

Traders said the most-actively traded notes were the 7¼% notes due 2019, which were up 3/8 point to 82, followed by the 6¾% notes due 2018 – included in the exchange offer – which were up 2½ points to “just north of 80.”

The 8 1/8% notes due 2023 – not included in the exchange offer – were down 1 point to 30, a trader said, a 5-point loss for the notes in the past two sessions.

Peabody dips into gains

The St. Louis-based Peabody Energy requested court approval to repay its debtor-in-possession financing obligations in full before the scheduled maturity date, according to a motion filed Friday with the U.S. Bankruptcy Court for the Eastern District of Missouri on Monday.

Though the motion was filed on Friday, a trader said the news came out so late the market did not have an opportunity to respond.

A market source said the 6½% notes due 2020 were up 4¾ points to 73½, while a trader said the notes were up 4 points to 74.

The 10% notes due 2018 were up a “couple of points” to 93½.

If it repays these DIP obligations before mid-January, Peabody said its estates will save in excess of $12 million in interest payments per quarter.

According to the motion, the performance of Peabody’s business has exceeded projections as a result of unexpected industry supply disruptions supporting a temporary significant increase in the price of seaborne thermal and metallurgical coal.

“Coal just continues to rally,” a trader said.

Murray Energy – the “other most active notable in that space” – climbed on Monday in its 11¼% notes due 2021, which were up 1 point to 75¾, per a trader. Another trader said the notes were up as high as 76½.

Dynegy Inc., an electric company whose power stations are either natural gas- or coal-fueled, saw a 2 1/8-point decrease in its 7 5/8% notes due 2024, which settled at 87 5/8, according to a trader.

Oil on the up-and-up

A three-day run-up of oil prices, caused by a supply-cut accord reached by the Organization of Petroleum Exporting Countries last Wednesday, put distressed energy bonds in the driver seat for the better part of last week.

The upward trend for oil and oil-related distressed companies continued on Monday, even though Western Texas Intermediate crude and Brent crude futures were down.

Western Texas Intermediate was down 73 cents, or 1.41%, to $50.95 at bond market close, and Brent crude was down 29 cents, or 0.53%, to $54.17 at the same time.

California Resources’ 8% notes due 2022 were up 3¼ points to 88½, a trader said, adding that the swing of oil future prices has a lot to do with the company’s movement.

A market source said the same notes were up 1¾ points to 87¼.

Lafayette, La.-based Stone Energy Corp. was also up in its 7½% notes due 2022, a market source said, seeing a 2¼-uptick to 58.

Denbury Resources’ 6 3/8% notes due 2021 were up 1½ points to 91½, a market source said, and Linn Energy’s 7¾% notes due 2021 were up 1½ points to 37¾.

A trader said two notes caught his attention in the energy sector, EP Energy Corp. and Exco Resources, Inc. The former’s 9 3/8% notes due 2020 were up 2½ points to 93¼, while Exco’s 7½% notes due 2018 were up 5 points to 58 1/8.

Said Exco notes were also up 5 points on Friday, the trader said, though he couldn’t specify what was causing the upsurge.

Rounding out oil and related notes were MEG Energy’s 7% notes due 2023, which were up 1 point to 92, and driller Noble Corp. plc’s 5¼% notes due 2022, which were up 2½ points to 58½.

‘Whacked’ before, up now

Community Health Systems, which had been “whacked” during the early part of last week, as one trader put it, was on the up for the second session in its 8% notes due 2019, up 3 points to 84½.

The hospital operator saw a 3-point increase in the same notes on Friday.

In pharmaceuticals, Valeant Pharmaceuticals International Inc.’s 6 1/8% notes due 2025 were up ¼ point to 74 1/8, a trader said.

The modest increases in the past two sessions comes after the company failed to sell its stomach-drug subsidiary, Salix Pharmaceuticals, for a reported $10 billion to chip away at the company’s $30 billion debt load.

Pharmaceutical company Concordia International Corp.’s 9% notes due 2022 were up ½ point to 44¼, a trader said.

Market round up

Telecommunication company Avaya Inc.’s 7% notes due 2019 were down ¼ point to 87.

Up ¼ point in the opposite direction were Claire’s Stores Inc.’s 9% notes due 2019, which settled at a 49½ handle.

Broadcasting and outdoor advertiser iHeartCommunications’ 14% notes due 2021 were up “almost 1 point” to 39 1/8, a trader said.

Caesar Entertainment Inc.’s 10% notes due 2018 were unchanged at 67.

Caroline Salls contributed to this review.

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