McDermott slips after earnings, guidance; Intelsat better on mixed earnings

By James McCandless

San Antonio, July 30 – Tuesday’s trading in the distressed market focused on energy and telecom names.

McDermott International, Inc.’s notes slipped after reporting a surprise earnings loss and slashing its guidance for the rest of the year.

As oil futures ramped up, California Resources Corp.’s, Ensco Rowan plc’s and Southwestern Energy Co.’s issues diverged.

Telecom name Intelsat SA’s paper finished better after releasing a lukewarm second-quarter earnings report.

Sector peer Digicel Group Ltd.’s notes also ended the session positive.

Elsewhere, pharma names Teva Pharmaceutical Industries Ltd. and Endo International plc.’s issues skewed higher.

Dairy name Dean Foods Co.’s paper was pushing upward in the aftermath of replacing its chief executive officer.

McDermott down

Energy name McDermott’s notes were seen slipping, traders said.

The 10 5/8% senior notes due 2024 dropped 1½ points to close at 79½ bid.

The notes saw $69 million trading by Tuesday’s close.

After the close on Monday, the Houston-based oil and gas engineering name released its second-quarter earnings results.

The company reported a loss of 7 cents per share, well below analyst expectations of a profit at 18 cents per share.

It also showed underwhelming revenues of $2.1 billion.

The name also surprised the market by adjusting its guidance to expect a loss for the rest of the year.

“I think the bonds will go lower into the 70’s context,” a trader said. “I don’t think anyone was expecting a loss, especially with all the positive press they got recently.”

In recent months, the company received positive attention after being awarded billions in Saudi Arabian construction projects.

Oil names fracture

As oil futures ramped up, distressed energy tranches diverged, market sources said.

Los Angeles-based independent oil and gas producer California Resources’ issues were non-cohesive in movement.

The 6% senior notes due 2024 lost ¾ point to close at 54 bid. The 8% notes due 2022 edged up ¼ point to close at 69½ bid.

London-based contract driller Ensco Rowan’s paper was mixed.

The 5.2% senior paper due 2027, while pushing up to 71 bid during the day, closed level at 70¾ bid. The 7¾% paper due 2026 added 2½ points to close at 75½ bid.

Spring, Texas-based sector peer Southwestern Energy’s notes also varied.

The 7¾% senior notes due 2027 gained 2 points to close at 89½ bid. The 6.2% notes due 2025 fell ¼ point to close at 85¾ bid.

West Texas Intermediate crude oil futures for September delivery rose $1.18 to settle at $58.05 per barrel.

North Sea Brent crude oil futures for September delivery was at $64.72 per barrel after a $1.01 gain.

Intelsat, Digicel up

In telecom, Intelsat’s issues finished the session better, traders said.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 picked up ¼ point to close at 92¼ bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 rose 1½ points to close at 80¾ bid.

On Tuesday morning, the Luxembourg-based satellite operator released its second-quarter earnings report.

The highlight was a wider-than-expected loss of $1.05 per share compared to analyst predictions of 95 cents per share.

Revenues surpassed expectations at $509.41 million.

The company has been waiting for the United States government to decide who manages the country’s 5G spectrum and where the generated profits go.

Kingston, Jamaica-based mobile phone network provider Digicel’s paper was also positive.

The 8¼% senior secured paper due 2022 shot up 3 points to close at 60 bid. The 6¾% paper due 2023 also gained 3 points to close at 47½ bid.

Teva, Endo trend better

Drug name Teva’s notes ended the day in different directions, market sources said.

The 3.15% senior notes due 2026 improved by ¼ point to close at 78¼ bid. The 4.1% notes due 2046 shaved off ¾ point to close at 66½ bid.

On Monday, news broke that the Petach Tikva, Israel-based generic pharmaceuticals name and other drug companies came to a settlement with California over a lawsuit alleging that companies were being paid to delay the release of generic versions of drugs in exchange for payment.

The company agreed to pay the state $69 million, the latest in a series of settlements that it has paid in what analyst expect to be a regular occurrence in the short term.

Dublin-based sector peer Endo, another part of the settlement, saw its issues gain.

The 6% senior notes due 2025 picked up ½ point to close at 59 bid.

Dean Foods gains

Dairy name Dean Foods’ paper was pushing upward, traders said.

The 6½% senior paper due 2023 rose ½ point to close at 56½ bid.

At the end of last week, the Dallas-based dairy product manufacturer announced that it would be replacing chief executive officer Ralph Scozzafava with food industry executive Eric Beringause.

The move comes after a string of negative quarters and decreasing sales, culminating in the company’s decision to explore strategic alternatives.

© 2015 Prospect News.
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