Hexion notes up after bankruptcy filing; PetSmart notes mixed as legal dispute continues

By James McCandless

San Antonio, April 1 – The new week in the distressed space saw a focus on news-driven names.

Hexion, Inc.’s notes gained after the company filed for Chapter 11 bankruptcy early Monday with a debt reduction plan.

Meanwhile, in retail, PetSmart Inc.’s issues were mixed as the company continues its legal dispute with its creditors.

Sector peers Bed Bath & Beyond Inc. and L Brands Inc.’s paper was similarly mixed.

In telecom, Intelsat SA’s notes were mixed on high activity while Frontier Communications Corp.’s issues ended better.

A boost for oil futures led to gains for California Resources Corp., Halcon Resources Corp. and Ensco plc’s paper.

Hexion bankrupt

Hexion’s notes were pushing higher on Monday, traders said.

The 6 5/8% notes due 2020 picked up 1¾ points to close at 85½ bid. The 10% notes due 2020 jumped up 3 points to close at 87 bid.

On Monday, the Columbus, Ohio-based chemicals producer, owned by Apollo Global Management, filed for Chapter 11 bankruptcy after months of concern surrounding its ability to meet its short-term obligations on its billions of debt.

Under the terms of its restructuring agreement, the company said holders of first-lien notes will receive $1.45 billion in cash, Prospect News reported.

The plan also calls for wiping out $2 billion in debt and a rights offering for $300 million in equity capital.

Other holders will receive a portion of rights offering proceeds.

“They’re going to come out of this not as overleveraged,” a trader said. “It also seems pretty generous to the first-lien holders. I’m not sure how the second-lien holders fare.”

After the close, S&P Global Ratings lowered the company’s issuer credit rating, senior debt rating and lower priority debt rating.

In recent months, the company’s notes fell further into distressed territory on chatter surrounding second-lien holders organizing to secure its interests when more than $2 billion in debt matures in 2020.

PetSmart mixed

Meanwhile, PetSmart’s issues were mixed in the session, traders said.

The 8 7/8% notes due 2025 held level to close at 74¾ bid. The 5 7/8% notes due 2025 edged up ¼ point to close at 84 bid.

On Friday, the Phoenix-based pet-supplies retailer lost a part of its legal fight against its creditors when a judge ruled that it had to turn over 10 volumes of documents related to its private equity transfer of e-commerce segment Chewy.com.

The company is working to end the legal proceedings with a loan amendment that stipulates that creditors must cease litigation in exchange for the company limiting the amount of new debt it can layer on.

Bed Bath, L Brands mixed

Elsewhere in the sector, Bed Bath & Beyond’s paper was also mixed, market sources said.

The 5.165% paper due 2044 rose ¼ point to close at 75½ bid. The 4.915% paper due 2034 shed 6½ points to close at 76 bid.

Activist investors with a 5% stake in the Union, N.J.-based retailer are making a push for the replacement of its chief executive officer and board of directors.

Columbus, Ohio-based retailer L Brands’ notes traded mixed.

The 6¾% notes due 2036 added ¾ point to close at 84¾ bid. The 5¼% notes due 2028 lost ½ point to close at 88¾ bid.

Intelsat mixed, Frontier better

Telecom name Intelsat’s issues closed the day mixed, traders said.

Intelsat Jackson Holdings SA’s 5½% notes due 2023 finished level to close at 89 bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 gained ¾ point to close at 70½ bid.

The Luxembourg-based satellite operator’s structure has been under pressure of late as the U.S. government mulls over whether to control a portion of the C-band spectrum and the potential revenue stream.

Norwalk, Conn.-based wireline name Frontier’s paper gained.

The 11% paper due 2025 added ¼ point to close at 66¼ bid. The 10½% paper due 2022 also gained ¼ point to close at 76¾ bid.

Oil pushes up

As crude oil-futures saw a boost on Monday, distressed oil names saw similar positivity, market sources said.

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

The 8% notes due 2022 garnered 1½ points to close at 81¼ bid.

Houston-based peer Halcon’s issues followed the positive trend.

The 6¾% notes due 2025 pushed 1½ points higher to close at 61¾ bid.

London-based contract driller Ensco’s paper gained.

The 7¾% paper due 2026 rose ¾ point to close at 86 bid. The 7.2% paper due 2027 picked up 1½ points to close at 82 bid.

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