PG&E rises as insurance fund proposed; Ensco, Rowan lower as merger finalized

By James McCandless

San Antonio, April 11 – News in several sectors, namely energy and retail, drove activity in the distressed space on Thursday.

PG&E Corp.’s notes were on the rise as California’s governor proposed an insurance fund for wildfire liabilities.

In oil and gas, Ensco plc’s and Rowan Cos. plc’s issues declined after their anticipated merger was finalized.

With oil futures falling in the session, Halcon Resources Corp.’s paper followed suit while California Resources Corp.’s notes finished mixed.

Helicopter name Bristow Group Inc.’s issues were similarly under pressure.

Meanwhile, Rite Aid Corp.’s paper moved in various directions after the release of a lukewarm earnings report.

Sector peer Bed Bath & Beyond, Inc.’s notes traded down despite beating earnings estimates.

Hexion, Inc.’s issues were mixed as it hammered out the details of its DIP financing.

PG&E rises

PG&E’s notes were on the rise in the Thursday session, traders said.

The 3.3% notes due 2027 gained 1¼ points to close at 88¾ bid. The 4% notes due 2046 rose 1 point to close at 81 bid.

The San Francisco-based bankrupt electric utility saw a boost on Thursday as news broke that California governor Gavin Newsom is expected to announce a plan to establish an insurance fund utility companies could tap in the event of liabilities stemming from potential wildfires.

The company filed for Chapter 11 bankruptcy earlier in the year after incurring billions in liability charges after 2017 and 2018 wildfires.

“It would take away a good portion of the risk,” a trader said. “The only question is how much is enough to stop something like that.”

The company is also considering expanding its board in order to appease BlueMountain Capital Management, LLC, a large shareholder who has been pushing for a management overhaul throughout the bankruptcy process.

It recently selected a new chief executive officer and a slate of 10 board members.

Ensco, Rowan down

Meanwhile, in the oil and gas space, Ensco’s issues were declining, market sources said.

The 7¾% notes due 2026 fell ¾ point to close at 87¼ bid. The 5.2% notes due 2025 shaved off ¾ point to close at 80¾ bid.

Late Wednesday, the London-based contract driller announced that it had finalized its merger with Rowan, a Houston-based sector peer.

Rowan’s 4¾% paper due 2024 dropped ½ point to close at 84½ bid.

The combined entity will be known as Ensco Rowan plc, though Rowan will continue to operate as a wholly owned subsidiary.

Under the terms of the agreement, which were adjusted earlier in the year, each Rowan shareholder received 2.75 shares of Ensco for each Rowan share.

“The idea is to be big enough to weather any storms,” a trader said.” Oil can’t do well forever and little guys get picked off in downturns.”

The merger was announced in October 2018 for $2.38 billion.

Moody’s Investors Service reacted by changing both entities’ outlooks to negative, downgrading Ensco’s corporate family rating, probability of default rating, senior unsecured notes rating and speculative-grade liquidity rating.

Oil futures dip

A dip in oil futures meant increased pressure on distressed oil tranches, traders said.

Houston-based independent oil and gas producer Halcon’s notes were pushed under.

The 6¾% notes due 2025 lost 1¾ points to close at 66 bid.

Los Angeles-based producer California Resources’ issues were mixed.

The 6% notes due 2024 garnered 2 points to close at 71 bid. The 8% notes due 2022 lost 1½ points to close at 82 bid.

West Texas Intermediate oil futures for May delivery lost $1.03 to close at $63.58 per barrel.

North Sea Brent crude oil futures for June delivery ended the session at $70.83 per barrel after a 90-cent drop.

Bristow lower

In energy services, Bristow’s paper was under pressure, market sources said.

The 6¼% paper due 2022 traded down ½ point to close at 17½ bid.

On Thursday, the Houston-based offshore helicopter name received a downgrade from S&P Global Ratings.

The agency lowered the company’s issuer credit rating and issue-level ratings, citing the company’s financial reporting issues and its potential need to attain more waivers from its lenders.

In March, lenders extended the company’s deadline for potential default on its securities to April 15.

“It’s surprising that they haven’t gone under,” a trader said.

Rite Aid mixed

Elsewhere, in retail, Rite Aid’s notes saw mixed results by the close, traders said.

The 6 1/8% notes due 2023 added 1 point to close at 81 bid. The 7.7% notes due 2027 shed 2½ points to close at 56 bid.

Early Thursday, the Camp Hill, Penn.-based drug store chain reported lukewarm fourth-quarter earnings.

It posted an earnings per share loss of $0.01, better than the expected $0.02 loss that analysts predicted.

More troubling to the market was the $5.38 billion in revenues where analysts expected $5.56 billion.

The company cited tightening factors in the pharmacy sector and lowered its forward guidance.

On Wednesday, the company’s board of directors agreed to a reverse stock split at a 1-to-20 ratio in order to maintain listing compliance with the New York Stock Exchange.

Bed Bath & Beyond drops

In more retail activity, Bed Bath & Beyond’s issues were falling, market sources said.

The 5.165% notes due 2044 lost 2 points to close at 75 bid. The 3.749% notes due 2024 declined by 2½ points to close at 92¾ bid.

The Union, N.J. retailer also released fourth-quarter earnings on Thursday morning with mixed results.

While investors were pleased to see the company’s $1.20 per share profit against the estimated $1.11 per share profit, it also reported an 11% drop in net sales.

The company also announced a 1-cent rise in its common stock dividend to 17 cents per share.

Hexion mixed

Chemicals name Hexion’s paper closed Thursday mixed, traders said.

The 6 5/8% paper due 2020 dropped ½ point to close at 79½ bid. The 10% paper due 2020 added 1¼ points to close at 80 bid.

On Thursday, the Columbus, Ohio-based bankrupt chemicals producer firmed pricing on its $350 million 18-month debtor-in-possession term loan at Libor plus 275 basis points, at the low end of the Libor plus 275 bps to 300 bps talk, Prospect News reported.

The company filed for Chapter 11 bankruptcy last week in an effort to reduce its short-term debt load.

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