PG&E notes lower after restructuring plan submitted; Mallinckrodt lifted on asset sale

By James McCandless

San Antonio, Sept. 10 – Shifts in the utilities and pharma sectors led much of the activity in the distressed debt space on Tuesday.

PG&E Corp.’s notes were headed lower as stakeholders and the market debated the viability of its restructuring plan.

Meanwhile, in pharma, Mallinckrodt plc’s issues were lifted on news that it had agreed to sell its contract manufacturing segment.

Sector peer Endo International plc’s paper also saw positivity.

In oil and gas, Chesapeake Energy Corp.’s notes rose on news that the company would execute a senior note swap for common stock.

Oil and gas producer EP Energy Corp.’s issues declined after the company announced that it would be skipping an interest payment.

Elsewhere, real estate name Realogy Holdings Corp.’s paper trended better after denying merger or sale talks with peer Compass.

Retailer J.C. Penney Co., Inc.’s notes ended lower after announcing a new clothing line.

Department store name L Brands, Inc.’s issues saw diverging movements.

Dairy producer Dean Foods Co.’s notes continued a positive trend started after it announced the completion of its strategic review.

PG&E lower

PG&E’s notes were seen heading lower throughout the session, traders said.

The 6.05% notes due 2034 shaved off ½ point to close at 108½ bid.

The notes saw about $37 million on the tape at the close.

After the close on Monday, the San Francisco-based bankrupt electric utility announced that it had filed a restructuring plan in bankruptcy court.

The company filed bankruptcy in January after warning stakeholders of billions in potential liabilities from 2017 and 2018 wildfires.

The $40 billion plan calls for new debt and equity as well at an $18 billion cap on wildfire liabilities.

Wildfire victims and some limited public entities will be compensated from a trust funded in an amount to be determined by the bankruptcy court, but not to exceed $8.4 billion, Prospect News reported.

“The lawyers won’t be happy about the number,” a trader said. “But they have to put a cap on it if they want to remain a going concern.”

The company plans to exit bankruptcy in time to participate in California’s new wildfire victims fund.

The company must submit a more detailed plan by Sept. 29.

Mallinckrodt, Endo lifted

Meanwhile, in the pharma space, Mallinckrodt’s notes were lifted, market sources said.

The 4 7/8% senior notes due 2020 jumped up 10 points to close at 72 bid. The 5¾% senior notes due 2022 tacked on 4 points to close at 40 bid.

The notes combined to see about $29 million trading.

Early Tuesday, news broke that the Stains-upon-Thames, U.K.-based drug maker agreed to sell BioVectra, its contract drug manufacturing unit, for $250 million to private equity name H.I.G. Capital.

“It isn’t enough money but it’s something,” a trader said. “But in the long-term, there’s just so much weighing it down.”

In recent weeks, the company’s structure has seen constant pressure over its role in the opioid epidemic, lawsuits originating from the epidemic, the hiring of restructuring advisers and the prospect of paying out millions of dollars in settlements.

On Friday, the company announced a $30 million settlement with two Ohio counties in a cash and donated medicine deal.

Dublin-based generics producer Endo’s paper also saw positivity.

The 6% senior paper due 2025 improved by ¾ point to close at 61¼ bid. The 6% senior notes due 2023 rose 1 point to close at 64½ bid.

Chesapeake rises

In the oil and gas space, Chesapeake Energy’s notes rose, traders said.

The 8% senior notes due 2025 shot up 2 points to close at 81¼ bid.

The notes dominated the energy space with about $52 million trading.

The Oklahoma City-based independent oil and gas producer announced on Tuesday that it entered into a privately negotiated securities exchange agreement on Monday to exchange $587.8 million of its senior notes and preferred shares for common stock, Prospect News reported.

Chesapeake agreed to issue a total of 250,721,554 shares of its common stock in exchange for about $40 million of its 5.75% convertible preferred stock, $112.7 million of its 4 7/8% senior notes due 2022, $129.3 million of its 5¾% senior notes due 2023, $155.8 million of its 5.5% convertible senior notes due 2026 and about $150 million of its 8% senior notes due 2027.

The name has seen its structure pushed further into distressed territory after a string of disappointing quarters and general weakness in its sector.

EP Energy declines

EP Energy, another oil and gas producer, sustained a decline in its issues, market sources said.

The 8% senior secured notes due 2024 fell 2¾ points to close at 41¼ bid. The 8% senior secured notes due 2025 slid 2 points to close at 5¼ bid.

The Houston-based energy company said on Monday that it elected to not make a Sept. 3 interest payment totaling $7 million on the 7¾% senior notes due 2022 issued by its EP Energy LLC and Everest Acquisition Finance Inc. subsidiaries, Prospect News reported.

The company now enters a 30-day grace period on the payment, after which nonpayment will trigger a cross-default and cross-acceleration under its capital structure.

EP Energy has been conducting a strategic alternatives review since Aug. 9.

Realogy better

Elsewhere, Realogy’s notes saw a better day, traders said.

The 4 7/8% senior notes due 2023 gained 1¾ points to close at 90¾ bid.

Over the weekend, the Madison, N.J.-based real estate name denied that it was involved in talks with peer Compass over a potential sale or merger.

In a company-wide memo, chief executive officer Ryan Schneider said that the assertion had come from Compass and was “designed to inspire sensational news coverage about Realogy that is simply not true.”

Realogy had previously filed a lawsuit against Compass in June alleging predatory poaching and price-fixing.

J.C. Penney lower

Retailer J.C. Penney’s notes ended the session lower, market sources said.

The 5 7/8% senior secured notes due shaved off ½ point to close at 86¼ bid.

News broke on Tuesday that the Plano, Tex.-based department store chain will be rolling out a new line of outdoor clothing under the St. John’s Bay Outdoor name.

The company’s debt saw gains recently after a number of executives made large purchases of J.C. Penney’s common stock.

Columbus, Ohio-based retailer L Brands’ notes saw a divergence, with some securities higher and others heading down.

The 6¾% senior notes due 2036 lost 2 points to close at 84 bid. The 5¼% senior notes due 2028 garnered ½ point to close at 92¼ bid.

Dean Foods improves

Dairy name Dean Foods’ paper saw more positivity, traders said.

The 6½% senior notes due 2023 jumped up 3½ points to close at 48 bid.

Late Friday, the Dallas-based dairy producer announced that it had concluded its strategic alternatives review, concluding that it will not sell the company and will work within its operating plan under new chief executive officer Eric Beringause.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.