GenOn gets a bump after restructuring agreement gets majority approval; Dynegy steady; E&P mixed; iHeart higher

By Colin Hanner

Chicago, May 23 – Activity in the distressed-debt market was focused Tuesday on GenOn Energy Inc., the Houston-based energy company whose proposed restructuring lifted bonds across the board on the session.

A subsidiary of NRG Energy Inc., GenOn gained a majority approval for a restructuring agreement via a Chapter 11 filing in which GenOn’s senior notes will receive 100% of the equity in the reorganized company, while holders of GenOn Americas Generation, LLC’s senior notes will receive 92% of par in cash.

Elsewhere in the power producing sector, Dynegy Inc., which had been whispered on Friday of being acquired by Vistra Energy Corp., was trading around the same levels it had seen Monday after an equity selloff caused some speculation around the issue.

Crude oil futures created more of a cushion above the $50 a barrel benchmark on Tuesday after support for continued supply cuts from Organization of Petroleum Exporting Countries seemed more likely ahead of a meeting to be held Thursday. Yet, distressed exploration and production companies were mixed on the session.

Private coal producer Murray Energy Corp. saw yet another day of similar gains following an earnings call held on Thursday.

Pet retailer PetSmart, Inc. was again active on news that the company will begin a roadshow for a two-part offering of notes to finance its acquisition of Chewy Inc., and a handful of retailers were mixed on the session.

Mixed electric, with GenOn leading

With a majority of noteholders approving a new restructuring agreement, GenOn Energy ticked higher by several points in each of its issues.

The 7 7/8% notes due 2017 were trading around 77, a trader said, the most-active bonds in the distressed arena on the session. Another trader said the notes were up 1½ points to 78.

The 9 7/8% notes due 2020 were up 3¼ points to 77.

And its 9½% notes due 2018 were up 4¼ points to 78.

With prices hovering around the same level and movement fairly consistent between issues, a market source said that prices had been compressed because “people anticipated some sort of deal.”

Members of an ad hoc committee that includes 39 institutions holding 60.6% of GenOn Energy’s notes and more than two-thirds of GenOn Americas’ notes have signed a consent agreement under which they will support the plan.

However, the proposal faces opposition.

A dissenting ad hoc committee made up of six holders with 27% of GenOn Energy’s notes has told the company that it opposes the terms and has put forward a counterproposal.

In a similar sector, Allentown, Pa.-based competitive energy and power generation company, Talen Energy Corp., was down 1 point in its 6½% notes due 2025, which finished at 77½.

And Dynegy Inc., which traded higher on Monday, though spooked by a downfall in its equity stock late on the same day, was faring similarly on Tuesday, with the 7 5/8% notes due 2024 finishing with a 96 handle.

On Friday, The Wall Street Journal reported that Dallas-based Vistra Energy Corp. was making a bid to acquire Dynegy.

Energy mixes as oil moves higher

With indications that an OPEC supply cut deal will extend into the early part of 2018 – Iraq became the latest to join Saudi Arabia to extend cuts on Tuesday, according to media reports – the E&P space was generally mixed.

California Resources Corp.’s 8% notes due 2022 were down ¼ point to 78¼, a market source said, while Canadian oil sands producer MEG Energy Corp.’s 6 3/8% notes due 2023 were up 7/8 point to 88½.

Offshore drilling contractor Atwood Oceanics Inc.’s 6½% notes due 2020 were unchanged at 87½, though an upgrade by Goldman Sachs – Atwood moved to a neutral position from a sell position – including talk of being a possible merger and acquisition target may be enough to keep it in the mix going forward.

For the third-straight session, St. Clairsville, Ohio-based Murray Energy Corp. continued to see gains of a round number in its 11¼% notes due 2021, which were up 1¼ points to 77¼ on Tuesday, a market source said.

The higher movement appears to be based on a positive earnings call that took place on Thursday, the results of which were kept private due to the nature of the company.

Retailers mix

Petsmart’s 7 1/8% notes due 2023 were “continuing to be active and moved up a bit” to a 95 handle, a market source said, a 1¼-point gain since Monday.

Men’s clothing retailer Men’s Wearhouse Inc.’s 7% notes due 2022 were down 1 to 86.

San Francisco-based children’s retailer Gymboree Inc.’s 9 1/8% notes due 2018 were up 1½ points to 5.35.

And personal care company, Revlon Inc., was up 5/8 point in its 6¼% notes due 2024, which fished at 88 5/8.

Distressed wrap-up

Hong Kong-based physical commodity trader Noble Group Ltd. saw yet another downfall in its 6¾% notes due 2020, which fell “4-5” points to the high-30s, a market source said.

On Tuesday, S&P said it lowered its long-term corporate credit rating on Noble to CCC+ from B+, citing the company’s unsustainable capital structure due to weak cash flows and profitability.

Frontier Communications Corp.’s 6 7/8% notes due 2025 were down ½ point to 81½.

Intelsat Jackson Holdings SA’s 7¾% notes due 2021 were up ¾ point to 56¼.

And iHeartCommunications, Inc.’s “first-lien paper was creeping up a bit, probably the first time it had been up in a while,” a source said.

Its 9% notes due 2019 were up ½ point to 78½, while its 9% notes due 2021 were up 1¼ points to 73¼.

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