Windstream falls on bankruptcy filing; PG&E slips on proposed trading restrictions

By James McCandless

San Antonio, Feb. 25 – Distressed trading was wrapped up in a new bankruptcy at the beginning of the last week in February.

Windstream Holdings, Inc.’s notes fell after the company announced that it had filed for Chapter 11 bankruptcy on Monday.

Closely tied Uniti Group Inc.’s issues improved despite generating a majority of its business from Windstream.

Elsewhere, PG&E Corp.’s paper slipped after it announced that it is considering restrictions on trading its debt.

In retail, L Brands, Inc.’s notes were worse off after Target announced that it would introduce a line of lingerie to compete with the company’s Victoria’s Secret brand.

Sector peer Neiman Marcus Group, Inc.’s issues were rising.

Weaker oil futures spurred similar movement for California Resources Corp.’s and Denbury Resources Inc.’s paper while Ensco plc’s notes closed mixed.

Community Health Systems, Inc.’s issues were seen moving higher.

Windstream bankrupt

Windstream’s notes fell, consuming much of the distressed space, traders said.

The 9% notes due 2025 dropped 2¼ points to close at 52 bid. The 6 3/8% notes due 2023 crashed 8¼ points to close at 15½ bid.

On Monday, the Little Rock, Ark.-based rural communications company filed for Chapter 11 bankruptcy.

The move comes after a Feb. 15 ruling from the U.S. District Court for the Southern District of New York on the case brought by Aurelius Capital Management alleging that the company defaulted on its bonds after spinning off one of its segments in 2015.

The court ruled in Aurelius’ favor and awarded a $310 million judgment.

In the days following the ruling, despite the company’s vows to appeal the decision, analysts predicted that it would seek bankruptcy protection by mid-March.

“There was kind of a pile-on after the ruling,” a trader said.

All three major ratings agencies issued downgrades to the company last week.

Uniti up

Despite its connection to Windstream, Uniti’s issues improved, market sources said.

The 8¼% notes due 2023 shot up 7½ points to close at 83 bid. The 7 1/8% notes due 2024 edged up ¼ point to close at 73¾ bid.

The Little Rock, Ark.-based real estate investment trust’s structure fared better than that of its former parent company.

“It ended higher, but it was very volatile today,” a trader said. “Something that might influence trading over the next month or so is the fact that most of its revenue still comes from Windstream. Or, maybe that they’re pretty removed from the litigation”

After the ruling against Windstream earlier in the month, the company sought to make clear that although its spinoff set proceedings in motion, it was not a party to the resulting litigation.

PG&E slips

Meanwhile, in utilities, PG&E’s paper went slightly negative, traders said.

The 6.05% paper due 2034 shaved off ¼ point to close at 93¾ bid.

The San Francisco-based bankrupt electric utility has asked a bankruptcy court to restrict trading on its debt while working through bankruptcy proceedings, arguing that too much trading could reduce the amount of its net operating losses.

“More people wouldn’t mind this is there wasn’t so much of their bonds out there,” a trader said. “Some of the distressed guys think it creates liquidity problems and doesn’t really help PG&E in the long run. Nobody likes the uncertainty it presents.”

Retail mixed

Elsewhere, L Brands’ notes were also on a negative track, market sources said.

The 6¾% notes due 2036 shed 1¼ points to close at 85¾ bid. The 5¼% notes due 2028 lost ½ point to close at 88 bid.

The Columbus, Ohio-based retailer saw negative attention after market chain Target announced that it would release its own line of lingerie, which would directly compete with L Brands-owned arm Victoria’s Secret.

“They’re the latest ones trying to take their market share,” a trader said. “From what I’ve read, the prices could do it. It’s already tough in retail right now and this is just added pressure for L Brands.”

Elsewhere, Dallas-based sector peer Neiman Marcus’ issues traded up.

The 8% notes due 2021 added 2 points to close at 50½ bid. The 7 1/8% notes due 2028 picked up 3 points to close at 85 bid.

Oil trends down

A decline in oil futures led to similar movement for distressed oil names, traders said.

Los Angeles-based independent oil and gas producer California Resources’ paper declined.

The 8% paper due 2022 shed ½ point to close at 80 bid.

Houston-based producer Denbury’s notes were also lower.

The 6 3/8% notes due 2021 fell 1¾ points to close at 84¼ bid. The 5½% notes due 2022 lost 6 points to close at 74½ bid.

London-based contract driller Ensco’s issues closed mixed.

The 7¾% notes due 2026 picked up ¼ point to close at 84¾ bid. The 7.2% notes due 2027 dropped ½ point to close at 82 bid.

At the Monday close, West Texas Intermediate crude oil futures for April delivery lost $1.78 to end at $55.48 per barrel.

North Sea Brent crude futures for April delivery ended the session at $64.76 per barrel after declining by $2.36.

Community Health up

Community Health’s paper was on the rise Monday, market sources said.

The 7 1/8% paper due 2020 gained 1½ points to close at 91 bid. The 6 7/8% paper due 2022 jumped up 3 points to close at 60½ bid.

The Franklin, Tenn.-based hospital operator’s structure has been on an upward trend since reporting fourth-quarter earnings last Wednesday, highlighting $3.45 billion in revenues.

It also reported a 42 cents per share loss, outpacing analyst predictions of a 58 cents per share loss.

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