PG&E declines as company mulls offer to avert bankruptcy; PDVSA gains despite sanctions

By James McCandless

San Antonio, Jan. 28 – The start of a new week in the distressed space saw a continued focus on electricity and oil names.

PG&E Corp.’s notes declined as the company received a $4 billion plan to avoid filing for bankruptcy.

FirstEnergy Solutions Corp., a subsidiary of FirstEnergy Corp., saw its issues jump.

Meanwhile, in oil and gas, Petroleos de Venezuela SA’s paper was gaining despite news late Monday afternoon that the U.S. government will impose sanctions on the company.

Elsewhere, oil futures were falling as California Resources Corp.’s, Ensco plc’s, and Hi-Crush Partners LP’s notes were also negative.

In retail, Neiman Marcus Group Inc.’s issues were rising as the company announced the departure of president and chief merchandising officer Jim Gold.

PetSmart, Inc.’s paper was mixed.

Chemicals maker Hexion Inc.’s notes were also mixed.

PG&E lower, FirstEnergy up

PG&E’s notes were declining on Monday, traders said.

The 6.05% notes due 2034 lost 1 point to close at 86 bid. The 5.4% notes due 2040 shed ¾ point to close at 82¾ bid.

As the San Francisco-based electric utility prepares to file for bankruptcy in the coming days, news broke midday Monday that a group of investment firms have submitted a $4 billion proposal to the company that would stave off the move.

The deal would be backed by billions in convertible bonds with a maturity of five years.

“They’ve apparently received a few offers like this,” a trader said. “They’ll probably give them a fair look but I won’t be surprised when they file Chapter 11 in the morning.”

The company announced earlier in the month that it would file for bankruptcy in preparation for a large accounting charge from potential liabilities in recent California wildfires.

Elsewhere in the space, FirstEnergy Solutions, a subsidiary of Akron, Ohio-based utility FirstEnergy, saw its issues jump higher.

The 6.85% notes due 2034 gained 3¾ points to close at 80 bid. The 6.05% notes due 2021 picked up 3¼ points to close at 81 bid.

PDVSA up

Despite negative news, PDVSA’s paper gained, market sources said.

The 6% paper due 2024 added 1½ points to close at 25¾ bid. The 6% paper due 2026 rose 2 points to close at 26 bid.

The Caracas, Venezuela-based state-owned oil and gas producer’s notes were on the rise despite news Monday afternoon that the U.S. Department of the Treasury has imposed new sanctions against the company.

The sanctions are intended to prevent any profits from the company from going to the current government headed by President Nicolas Maduro as political opposition seeks to replace his government.

Citgo, the company’s American segment, will be allowed to continue to operate.

Oil names fall

A downturn in oil futures led to similar movements in distressed oil names, traders said.

Los Angeles-based independent oil and gas producer California Resources Corp., a bellwether in the sector, saw its notes decline.

The 8% notes due 2022 fell ½ point to close at 79¼ bid.

Meanwhile, London-based contract driller Ensco’s issues were also negative.

The 7¾% notes due 2026 lost 2¼ points to close at 79 bid. The 7.2% notes due 2027 took off 1½ points to close at 77 bid.

Houston-based energy logistics name Hi-Crush’s paper declined.

The 9½% paper due 2026 fell ½ point to close at 79 bid.

West Texas Intermediate crude oil futures for March delivery lost $1.70 to close the session at $51.99 per barrel.

North Sea Brent crude futures ended the trading day at $59.93 per barrel after falling $1.71.

Neiman higher, PetSmart mixed

In the retail sector Neiman Marcus’ notes were moving higher, traders said.

The 8% notes due 2021 picked up 1 point to close at 42 bid.

On Monday the Dallas-based luxury retailer announced that president and CMO Jim Gold would be leaving the company in March.

Gold has been serving in his current role since 2014.

Phoenix-based pet supplies retailer PetSmart’s issues ended the day mixed but nearly level.

The 8 7/8% notes due 2025 added ½ point to close at 63 bid. The 5 7/8% notes due 2025 lost ¼ point to close at 78½ bid.

Hexion mixed

Hexion’s paper was also mixed on Monday, market sources said.

The 6 5/8% paper due 2020 dropped ½ point to close at 79½ bid. The 9% paper due 2020 rose 1½ points to close at 47 bid.

The Columbus, Ohio-based chemicals name has seen negative-to-mixed activity of late as the global market for one of its core materials, resin, tightens in the current trading climate between China and the U.S.

“They’ve been consistently bleeding with all of this trade stuff,” a trader said.

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