PG&E notes lower as company secures financing; Adient issues rise despite downgrade

By James McCandless

San Antonio, Jan. 22 – The start of a short week in the distressed space saw broad weakness across the market.

PG&E Corp.’s notes were lower Tuesday after the company secured $5.5 billion in two-year debtor-in-possession financing.

Auto parts manufacturer Adient Global Holdings Ltd.’s issues were on the rise despite a late-in-the-day ratings agency downgrade.

In oil and gas, Hornbeck Offshore Services, Inc.’s paper was rising after amending the terms of its exchange offer for its senior notes.

Meanwhile, declines in oil futures were the backdrop for mixed results for Ultra Petroleum Corp.’s and Ensco plc’s notes.

Offshore transporter PHI, Inc.’s issues were rising after days of volatility as the market increases its scrutiny over a coming maturity date.

Sector peer Bristow Group, Inc.’s paper moved down.

Retailers Neiman Marcus Group, Inc.’s notes gained while J.C. Penney Co., Inc.’s issues fell.

PG&E lower

In the utilities space, PG&E’s notes were headed lower, traders said.

The 6.05% notes due 2034, considered a bellwether for the entire structure, dropped ½ point to close at 83¼ bid. The 4¾% notes due 2044 fell ½ point to close at 77 bid.

On Tuesday, news broke that the San Francisco-based electric utility, under pressure since announcing that it would file for Chapter 11 bankruptcy soon, secured $5.5 billion in DIP financing for the two-year bankruptcy it expects to work through.

The financing consists of a $3.5 billion revolving credit facility, a $1.5 billion initial term loan facility and a $500 million delayed-draw term loan.

Also on Tuesday, the company’s board of directors received a second letter from large shareholder BlueMountain Capital claiming that the company has not outlined a good enough reason for filing for bankruptcy.

“They’re just worried about the equity being wiped out,” a trader said.

The company’s structure fell into distressed territory recently after announcing that it may incur an outsized accounting charge stemming from potential liabilities in recent California wildfires.

Adient up

Elsewhere, Adient’s issues were on the rise, market sources said.

The 4 7/8% notes due 2026 picked up ½ point to close at 75½ bid.

Late Tuesday, the Dublin-based auto parts manufacturer received a ratings downgrade from Moody’s Investors Service.

The agency lowered the its senior secured debt rating, senior unsecured rating, and a few issue-level ratings.

The company has been under scrutiny recently after reporting lackluster preliminary first-quarter results, with most of the attention going to an expected EBITDA of $175 million, a significant decrease from the same period the year before.

“This one is getting more attention, but it’s still kind of a sleeper, especially with all of the primary activity going on today,” a trader said. “But it’s still pretty topical.”

Hornbeck higher

In the oil and gas space, Hornbeck’s paper saw gains, market sources said.

The 5 7/8% paper due 2020 rose 4¾ points to close at 60 bid.

Early Tuesday, the Covington, La.-based marine transportation name announced that it was amending the terms of its exchange offer, which includes the 5 7/8% paper.

Most notably, the company reduced the tender cap from $200 million to $185 million.

“That’s the main concern,” a trader said. “Holders aren’t confident that they’ll be able to complete the offer. They’re not even sure the company can do it on the new terms. Something else will have to be worked out.”

Oil names mixed

A negative day for oil futures led to a mixed day for distressed oil names, traders said.

Ultra Petroleum’s notes were mixed.

The 6 7/8% notes due 2022 fell 3 points to close at 41 bid. The 7 1/8% notes due 2025 added 2 points to close at 30 bid.

On Thursday, the Houston-based independent oil and gas producer announced a favorable judgment that does not make the company liable to pay $400 million that creditors asserted was payable to them after the company exited bankruptcy in 2017.

London-based contract driller Ensco’s issues were also mixed Tuesday.

The 7¾% notes due 2026 dropped 1¼ points to close at 79½ bid. The 7.2% notes due 2027 added ½ point to close at 78½ bid.

The Tuesday session saw West Texas Intermediate crude oil futures for February delivery decline by $1.23 to end at $52.57 per barrel.

North Sea Brent crude futures closed at $61.50 per barrel after losing $1.20.

PHI rises

Elsewhere, PHI’s paper saw a boost, market sources said.

The 5¼% paper due 2019 rose 1 point to close at 65 bid.

The Lafayette, La.-based offshore transporter continued to see pressure from the market as the maturity date for the 5¼% paper approaches in March.

Similarly weak sector peer Bristow’s notes were negative.

The 6¼% notes due 2022 shaved off ½ point to close at 46¼ bid.

Neiman Marcus off

In the troubled retail sector, Neiman Marcus’ issues were positive, traders said.

The 8% notes due 2021 gained ¾ point to close at 37¼ bid.

The Dallas-based luxury retailer has been involved in a legal battle with creditors over its private equity transfer of e-commerce arm MyTheresa.

“There hasn’t been an update on that in a while, but it’s trading like something’s about to happen soon,” a trader said.

Plano, Texas-based peer J.C. Penney’s paper saw a slight decline.

The 8 5/8% paper due 2025 shaved off ½ point to close at 55¾ bid.

© 2015 Prospect News.
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