EP Energy dips on forbearance, downgrades; PetSmart lower as subsidiary posts earnings

By James McCandless

San Antonio, Sept. 17 – The distressed debt space saw negativity against the overall mixed nature of markets on Tuesday.

EP Energy Corp.’s notes saw a dip after the company did not make a $40 million interest payment on its secured notes and received ratings downgrades.

As oil futures leveled off, Chesapeake Energy Corp.’s, Valaris plc’s and Whiting Petroleum Corp.’s issues also gave back some of Monday’s gains.

Retailer PetSmart, Inc.’s paper was mixed after as a subsidiary posted disappointing quarterly results.

Sector peer Bed Bath & Beyond Inc.’s notes were under pressure.

Marketing name Acosta Sales & Marketing Co.’s issues moved higher despite reports of its hiring of restructuring advisers.

In the telecom space, Frontier Communications Corp.’s paper went negative in the aftermath of announcing that it would make debt payments.

Satellite operator Intelsat SA’s notes were varied and skewing downward.

EP Energy dips

EP Energy’s notes saw a dip in Tuesday’s activity, traders said.

The 7¾% senior secured notes due 2026 lost 2 points to close at 80¼ bid. The 8% senior secured notes due 2024 also fell 2 points to close at 46 bid.

On Monday, the Houston-based independent oil and gas producer announced that it failed to make the $40 million interest payment due Aug. 15 on the 8% senior secured notes due 2025 issued by wholly owned subsidiaries EP Energy LLC and Everest Acquisition Finance Inc. within the 30-day grace period, Prospect News reported.

Despite this constituting an event of default, the company said that its subsidiaries entered into forbearance agreements with holders of more than 70% of the notes.

The noteholders have agreed not to exercise any default-related rights through 11:59 p.m. ET on Sept. 22.

“They’re delaying the inevitable,” a trader said. “I expect them to file at that time.”

The news triggered ratings downgrades from Moody’s Investors Service and S&P Global Ratings on Tuesday.

Moody’s cut its probability of default rating, corporate family rating and several issue-level ratings.

S&P lowered the name’s senior secured debt and unsecured notes ratings.

Oil names decline

As the energy market settled, oil names gave back some of Monday’s gains, market sources said.

Tuesday saw oil prices taper off from historic Monday gains in the aftermath of an attack on Saudi Arabian crude oil facilities.

After initial fears of a world crude shortage, the Saudi energy minister said that full output would be restored by the end of the month and that half of production lost in the attack had been restored.

West Texas Intermediate crude oil futures for October delivery gave back $3.56 to settle the day at $59.34.

North Sea Brent crude oil futures for November delivery finished at $64.55 per barrel after a $4.47 dive.

Oklahoma City-based producer Chesapeake Energy’s issues tracked lower.

The 8% senior notes due 2025 shaved off ¾ point to close at 85¼ bid. The 8% senior notes due 2027 slid 3 points to close at 81½ bid.

London-based contract driller Valaris’ paper followed the sector trend.

The 5.2% senior notes due 2025 dipped 3 points to close at 64 bid. The 7¾% senior notes due 2026 declined by 2 points to close at 66¼ bid.

Denver-based sector peer Whiting Petroleum’s notes also ended on lower footing.

The 6¼% senior notes due 2023 lopped off 1½ points to close at 84¾ bid. The 6 5/8% senior notes due 2026 declined by 2¼ points to close at 78 bid.

PetSmart notes diverge

Meanwhile, retailer PetSmart’s issues diverged, traders said.

The 8 7/8% senior notes due 2025 tacked on ¼ point to close at 95¼ bid. The 5 7/8% senior notes due 2025 lost ½ point to close at 99½ bid.

On Tuesday afternoon, Chewy.com, a subsidiary of Phoenix-based pet supplies retailer PetSmart, released its quarterly earnings results.

The company reported a loss of 21 cents per share, wider than the 11 cent loss that analysts had expected.

Shares for the company went public in June after a drawn out legal challenge over a private equity transfer of a major stake in Chewy.

Union, N.J.-based retail name Bed Bath’s paper moved lower during the day.

The 5.165% senior notes due 2044 fell ¾ point to close at 68¾ bid. The 4.915% senior notes due 2034 shaved off ¼ point to close at 76 bid.

Acosta up

In marketing, Acosta’s notes shifted higher, market sources said.

The 7¾% notes due 2022 added 1½ points to close at 17 bid.

News broke on Tuesday that the Jacksonville, Fla.-based sales and marketing name had hired restructuring advisers in an effort to manage its $2.7 billion debt load.

“This is going a little under the radar at the moment,” a trader said. “But it’s been teetering since late last year. It’s been kind of dormant for a while.”

Frontier lower

Telecom name Frontier’s issues were negative, traders said.

The 10½% senior notes due 2022 dropped 1¾ points to close at 53¼ bid. The 11% senior notes due 2025 lost 1¾ points to close at 51¾ bid.

The Norwalk, Conn.-based wireline communications company said on Monday that it would be making $320 million in debt payments.

Previously, the company indicated that it was giving consideration to several options to handle its maturities, including seeking bankruptcy protection, setting off market speculation of a potential bankruptcy filing.

Luxembourg-based satellite operator Intelsat’s paper was flat to lower.

Intelsat Jackson Holdings SA’s 5½% senior paper due 2023 held level at 93 bid. Intelsat (Luxembourg) SA’s 8 1/8% senior paper due 2023 slipped ½ point to close at 81½ bid.

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