iHeartMedia issues fall as company misses coupon; Northern Oil notes jump on exchange news

By James McCandless

San Antonio, Feb. 1 – The distressed debt market continued its sluggish activity Thursday, although the day’s news brought a glimpse of a faster pace to come, according to traders.

iHeartMedia, Inc.’s notes took another tumble on the announcement that the company would not pay interest on part of its debt, leading to a rating agency downgrade.

On the other side of the spectrum, issues in Northern Oil and Gas, Inc. shot up several points on news Thursday morning of a note exchange agreement that also involves raising new equity and management changes.

Others in the energy space were active, such as bellwether California Resources Corp. and also Noble Energy, Inc. and EP Energy Corp.

Familiar telecom names Frontier Communications Corp. and Intelsat SA held to their reputations as perennial high volume contributors to the trading day.

iHeartMedia skips coupon

Notes of San Antonio-based broadcasting and outdoor advertising company iHeartMedia plummeted as the company announced that it would forgo payment on $106 million in interest on subsidiary iHeartCommunications, Inc.’s 14% notes due 2021. This led to a downgrade from Standard & Poor’s in its corporate credit rating, a market source confirmed (see related stories elsewhere in this issue).

Those notes fell 1½ points to close at 5¾ bid. The company’s 7¼ notes due 2027 dropped about ¼ point to close at almost 26¼ bid. The 10 5/8% notes due 2023, however, gained more than 5 points to end the day at 76¾ bid.

“This is the way they’ve been operating for a while,” a trader said. “There’s not much they can do but circle the drain.”

iHeartCommunications has been trying to exchange its outstanding notes for the better part of a year now but negotiations are ongoing.

Northern Oil plans exchange

Minnetonka, Minn.-based independent oil and gas company Northern Oil and Gas issues traded much higher Thursday as the company announced that it would be offering an exchange for a majority of its 8% notes due 2020 for new notes due 2023 and common stock, a trader said (see related story elsewhere in this issue).

Those notes, which closed Wednesday at just above 85¾ bid, finished Thursday at 92 bid. The other 8% notes due 2020 climbed over 9 points to close at just shy of 89¾ bid.

In addition to the exchange, the company will raise new equity and make some management changes.

Energy names provide volume

As crude oil production remains strong, bonds in distressed energy names continue to be actively traded, a trader said.

Los Angeles-based oil and gas production company California Resources continued to be a favorite among traders. Its 6% issue due 2024 lost more than 2 points to close at 73 bid while its 8% issue due 2022 dropped almost ½ point to close at 83½ bid.

After announcing that it would divest itself from an Israeli offshore oil operation, Houston-based independent oil and gas name Noble Energy bonds were active, according to a trader. The 5¼ bonds due 2043 rose ½ point to close at 66¾ bid.

“They are showing some responsibility in focusing on core assets,” a trader said. “That could be good for them in the long run.”

Houston-based oil and gas company EP Energy continued the activity seen in its paper in recent days. Its 7¾% paper due 2022 rose more than 1 point to end at 74¾ bid.

Telecom favorites trade

Notes in Norwalk, Conn.-based wireline telecom Frontier Communications began rising again after a correction from last week’s gains on news that the company had amended its credit agreements to provide better debt service flexibility.

The 7 5/8% notes due 2024 gained more than 1 point to close at almost 67 1/5 bid. Its 10½% notes due 2022 traded up slightly to come closer to 83 bid at the end of trading. The 11% notes due 2025 gained more than 2 points to close near 78 ½ bid.

Luxembourg-based satellite communications company Intelsat saw the usual amount of high volume trading. The Intelsat Jackson SA 7¼% notes due 2020 ended the day as it did on Friday near 87 bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 traded down almost ½ point to close at about 42 bid while the 7¾% notes due 2021 closed higher, just shy of 46 bid.

“I thought it was a very soft start to February,” a trader said. “Other than energy, there was not a whole lot kicking around today.”

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