McDermott plunges on turnaround talk; J.C. Penney notes lower amid ratings downgrade

By James McCandless

San Antonio, Sept. 18 – The week’s midpoint saw diverging movements in the distressed market with energy names continuing to make a splash.

McDermott International, Inc.’s notes crashed after news broke that the company had hired a turnaround adviser.

Conversely, Ultra Petroleum Corp.’s issues gained after the company’s creditors suspended earnings requirements in exchange for a freeze on new drilling.

Oil and gas producers Chesapeake Energy Corp.’s and Whiting Petroleum Corp.’s paper slid with oil futures.

Meanwhile, in retail, J.C. Penney Co., Inc.’s notes moved lower amid receiving a ratings downgrade.

Sector peer PetSmart, Inc.’s notes saw another day of diverging activity.

Telecom name Frontier Communications Corp.’s paper was in decline as Intelsat SA’s notes went in different directions.

In utilities, PG&E Corp.’s notes were active but ultimately unchanged.

McDermott crashes

McDermott’s notes crashed in Wednesday’s session, traders said.

The 10 5/8% senior notes due 2024 cratered 35¾ points to close at 32¾ bid.

The Houston-based oil and gas engineering name’s structure dived after news broke that it had hired a turnaround consultant to reverse its recent spate of underperformance.

The company has been under continual pressure after a string of disappointing quarters.

In a statement, the company said that it routinely hires advisers to evaluate futures opportunities.

By the close, the equity had lost over 63% of its value.

“I would call it an overreaction,” a trader said.

Earlier in the day, the company’s notes had already been under water with the rest of the energy sector, a market source said.

Ultra Petroleum gains

On the other side of the spectrum, Ultra Petroleum’s notes gained, market sources said.

The 7 1/8% senior notes due 2025 improved by 1½ points to close at 8½ bid. The 11% notes due 2024 added ¾ point to close at 17 bid.

On Wednesday, the Englewood, Colo.-based independent oil and gas producer received a break from its creditors, who agreed to suspend earnings target requirements.

In exchange, the company will halt new spending on drilling wells.

“I’m not sure if the trade-off is positive or not, but it was a positive sign,” a trader said.

The company is once again facing declining production since it exited bankruptcy in 2017.

On Monday, the company amended its credit facility, including establishing the fall borrowing base at $1.75 billion, Prospect News reported.

The $1.75 billion borrowing base includes $200 million of commitment allocated to the credit facility, stepping down to $120 million in February 2020 when the credit facility balance nears full repayment.

Additionally, it suspended drilling in its Pinedale field in Wyoming.

Oil names slide

Amid more waves in the energy sector, distressed names moved lower, traders said.

As worries of Saudi oil output dissipated, new turmoil arose as president Donald Trump indicated that sanctions against Iran would “substantially increase.”

West Texas Intermediate crude oil futures for October delivery shifted lower to $1.23, settling at $58.11 per barrel.

North Sea Brent crude oil futures for November delivery finished at $63.60 per barrel after a 95 cent loss.

Oklahoma City-based Chesapeake Energy’s paper followed the negative trend.

The 8% senior notes due 2025 shaved off ½ point to close at 84¾ bid. The 8% senior paper due 2027 dipped 1¼ points to close at 80¼ bid.

Denver-based sector peer Whiting Petroleum’s notes were also declining.

The 6¼% senior notes due 2023 slipped 1¼ points to close at 83½ bid. The 6 5/8% senior notes due 2026 fell 2¼ points to close at 75¾ bid.

J.C. Penney lower

Meanwhile, in retail, J.C. Penney’s issues trended lower, market sources said.

The 5 7/8% senior secured notes due 2023 dipped ¼ point to close at 85¾ bid. The 5.65% senior notes due 2020 shed ¾ point to close at 95¾ bid.

Fitch Ratings issued a downgrade to the Plano, Tex.-based department store chain’s long-term issuer default rating.

The agency cited “continued market share losses and declining EBITDA, with lack of visibility for a material turnaround although there are no near-term liquidity concerns.”

The company had seen a recent bout of positivity after several executives made large purchases of its equity.

Phoenix-based pet supplies name PetSmart’s paper saw a mixed day.

The 8 7/8% senior notes due 2025 improved by ¾ point to close at 96 bid. The 5 7/8% paper due 2025 gave back ½ point to close at 99 bid.

Frontier declines

Telecom name Frontier’s notes were in decline, traders said.

The 10½% senior notes due 2022 dropped 3 point to close at 50¼ bid. The 11% senior notes due 2025 lost 2¼ points to close at 49½ bid.

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

Since the announcement, the company’s notes have seen a negative trend.

Luxembourg-based satellite operator Intelsat’s issues differed in direction.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 held level at 93 bid. Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 dipped ¾ point to close at 80¾ bid.

PG&E active, flat

In utilities, PG&E’s paper was active but finished flat, market sources said.

The 6.05% paper due 2034 was level at 110½ bid.

Last week, the San Francisco-based bankrupt electric utility said that it had settled insurance subrogation claims against it, agreeing to pay out $11 billion.

The company still has claims against it from 2017 and 2018 wildfire victims.

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