Hexion sell-off continues; Acosta dips; Simmons Food eyed; Tesla jumps

By Abigail W. Adams

Portland, Me., Oct. 25 – Hexion Inc. remained in focus in the distressed debt space with its first and second lien issues continuing their downward spiral as creditors gear up for a fight and the chemical sector in general remains under pressure.

Acosta, Inc.’s 7¾% senior notes due 2022 dipped slightly in active trading although no news appeared to be connected to the movement.

Distressed debt players were eyeing Simmons Foods Inc.’s 5¾% senior notes due 2024. While firming on Thursday, the notes dropped to a new low after missing their numbers.

Tesla Inc.’s 5.3% senior notes due 2025 were major volume movers with the notes jumping 2½ points after the electric car manufacturer crushed analyst expectations in its third-quarter report.

Hexion’s hex

Hexion’s bonds remained under pressure on Thursday with the chemical manufacturer’s capital structure moving lower as second-lien note holders prepare for negotiations and competitors report lackluster earnings.

The 9% second-lien notes due 2020 continued to “get destroyed,” a market source said. The notes dropped more than 6 points to a 60 handle on Thursday.

They closed Wednesday at 66½.

The 6 5/8% first-lien notes due 2020 dropped another point on Thursday to trade around 90.

Hexion’s 13¾% first-lien notes due 2022 were down to 67¾, a 20 point drop since the sell-off in Hexion’s notes began last week, a market source said.

The sell-off was triggered after 9% second-lien noteholders hired law firm Milbank, Tweed, Hadley & McCloy in anticipation of upcoming negotiations regarding the 2020 bonds last week.

The second-lien noteholders were preparing to fight first-lien note holders with the 2020 maturity wall approaching, a market source said.

“Based on the way the seconds are trading, it doesn’t seem like the market thinks they’re owed anything,” the source said.

In addition to the brewing battle, the chemical sector as a whole has been under pressure with competitors reporting disappointing earnings, a source said.

Acosta dips

Acosta’s 7¾% senior notes due 2022 were down slightly in active trading although there was no news connected to the movement.

The notes were down about ½ point to trade at 34¼, a market source said.

Simmons Food eyed

Distressed debt players were eyeing Simmons Foods’ 5¾% senior notes due 2024 on Thursday. While firming slightly on improved market conditions on Thursday, the 5¾% senior notes dropped to a 69 handle after reporting disappointing numbers.

The 5¾% notes were seen at 70½ bid, 70¾ offered on Thursday, a market source said.

The 5¾% notes from the poultry, pet and animal nutrition products firm were on a 76 handle earlier in October.

Tesla jumps

Tesla’s 5.3% senior notes due 2025 jumped in active trading after the struggling electric car manufacturer surpassed expectations with a profit-setting third quarter.

The notes jumped another 3/8 point on Thursday to trade up to 88 5/8, a market source said. More than $28 million of the bonds were on the tape by the late afternoon.

The notes were up 1¾ points in high-volume activity on Wednesday after Tesla announced its earnings beat.

Tesla squashed analyst expectations in its third-quarter earnings, reporting non-GAAP earnings per share of $2.90 versus analyst expectations of a loss per share of 19 cents and an adjusted profit of $516 million.

While there were previous concerns about Tesla’s ability to cover its maturing convertible bonds in 2018 and 2019, those concerns have diminished, sources said.

Tesla’s bonds and equity surged following the earnings announcement.

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