PG&E rises on bankruptcy filing; Ensco improves as merger agreement amended

By James McCandless

San Antonio, Jan. 29 – The distressed market spent Tuesday largely abuzz over the long-anticipated bankruptcy filing of PG&E Corp.

PG&E’s notes, however, were rising on the news after the company had mulled and dismissed several last-minute rescue offers.

Elsewhere, Ensco plc’s issues were rising after the company once again changed the share exchange ratio for a merger.

Rowan Cos. plc, Ensco’s merger partner, saw its paper also improve.

A better day for oil futures mirrored positive trends for California Resources Corp.’s, Weatherford International plc’s, and Hornbeck Offshore Services Inc.’s notes

Meanwhile, Western Digital Corp.’s issues were better despite recent disappointing earnings and market reaction to Apple’s lackluster earnings report.

Retailer Neiman Marcus Group Inc.’s paper was improving a day after the company announced the departure of its president and chief merchandising officer James Gold.

Sector peer L Brands, Inc.’s notes were mixed.

PG&E up

At the forefront of distressed activity, PG&E’s notes were positive, traders said.

The 6.05% notes due 2034 grabbed 2 points to close at 88 bid. The 3.3% notes due 2027 gained ¼ point to close at 79¼ bid.

On Tuesday morning, after approximately a month of anticipation, the San Francisco-based electric utility filed for Chapter 11 bankruptcy.

The company had previously warned the market that it would file when faced with the possibility of incurring an estimated $30 billion accounting liability charge for recent California wildfires.

In bankruptcy court, it also filed for approval of $5.5 billion of debtor-in-possession financing with JPMorgan, Bank of America, Barclays, Citi, BNP Paribas, Credit Suisse, Goldman Sachs, MUFG Union Bank and Wells Fargo acting as joint lead arrangers, Prospect News reported.

After market close, S&P Global Ratings lowered the issuer credit rating and the short-term rating for the company and its subsidiary, Pacific Gas & Electric Co.

“The reorganization isn’t going to be clear-cut and the fees are going to be enormous,” a trader said. “Another interesting thing is that the structure is so large that there hasn’t been much weakness spread to others in the sector. But that could change since everyone seems to have had their fill of the bonds.”

On Monday, the company reviewed several rescue bids from investment firms before opting for bankruptcy.

Ensco, Rowan better

Elsewhere, in the oil and gas sector, Ensco’s issues were better, market sources said.

The 7¾% notes due 2026 rose 2¼ points to close at 81¼ bid. The 7.2% notes due 2027 also picked up 2¼ points to close at 78¼ bid.

On Tuesday, the London-based contract driller announced that it had again amended its stock exchange ratio as part of its merger agreement with Houston-based sector peer Rowan.

Under the new plan, Rowan shareholders will receive 2.75 shares of Ensco for each share of Rowan.

The agreement had recently been amended to raise the ratio to 2.6 Ensco shares from the original agreement of 2.215 shares.

Both companies recently delayed shareholder meetings to consider the new terms.

A new shareholder vote has yet to be scheduled.

Rowan’s paper was also improving.

The 7 3/8% paper due 2025 picked up ¾ point to close at 85¾ bid. The 4 7/8% paper due 2022 gained 1 point to close at 88 bid.

Oil names rise

As oil futures bounce back from Monday’s losses, distressed oil names saw similar movement, traders said.

Los Angeles-based independent oil and gas producer California Resources’ notes were positive.

The 6% notes due 2024 rose ½ point to close at 70 bid. The 8% notes due 2022 added ¾ point to close at 80 bid.

Baar, Switzerland-based oilfield services name Weatherford’s issues were on an upward trend.

The 8¼% notes due 2023 edged up ¼ point to close at 64¼ bid. The 9 7/8% notes due 2023 added ½ point to close at 65 bid.

Covington, La.-based sector peer Hornbeck’s paper told a similar story.

The 5% paper due 2021 jumped up 5 points to close at 50 bid.

At the close of Tuesday’s session, West Texas Intermediate crude oil futures for March delivery closed at $53.31 per barrel after a $1.32 increase.

North Sea Brent crude futures also ended higher, gaining $1.39 to close at $61.32 per barrel.

Western Digital rises

Meanwhile, Western Digital’s notes saw a better day, market sources said.

The 4¾% notes due 2026 gained 1¾ points to close at 93 bid.

The San Jose, Calif.-based data storage manufacturer’s notes have been under pressure recently, mostly due to its ties to tech giant Apple and Apple’s warnings to investors that iPhone sales would not meet expectations in the first quarter, which were released after the close on Tuesday.

“If it’s a play, then people are looking to push it up and bring it back down after we open back up in the morning,” a trader said.

Neiman Marcus gains

In the retail space, Neiman Marcus’ issues were improving, traders said.

The 8% notes due 2021 picked up ½ point to close at 42½ bid.

The Dallas-based luxury retailer’s notes have been on a four-day positive streak, undeterred by Monday’s news that president and chief merchandising officer Jim Gold would be departing the company in March.

Columbus, Ohio-based sector peer L Brands’ paper was mixed.

The 6¾% paper due 2036 lost ¼ point to close at 84 bid. The 5¼% paper due 2028 edged up ¼ point to close at 87½ bid.

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