PG&E declines as stakeholders clash; U.S. Steel notes weaken after revised outlook

By James McCandless

San Antonio, Oct. 2 – The distressed debt market was overall weaker, focused again on the newsmakers of the day.

PG&E Corp.’s notes were in decline as creditors and stockholders clash over the company’s exclusive right to propose a restructuring plan.

Meanwhile, United States Steel Corp.’s issues fell after a ratings agency revised its view of the company for the worse.

In the pharma space, Teva Pharmaceutical Industries Ltd.’s and Mallinckrodt plc’s notes were under pressure amid continuing shifts in the industry.

Another day of negative movements for oil futures was mirrored by Chesapeake Energy Corp.’s, Valaris plc’s and McDermott International, Inc.’s notes.

Elsewhere, WeWork Cos. Inc.’s issues were under water amid continuing negative attention.

Dairy name Dean Foods Co.’s paper was seen trailing.

PG&E declines

PG&E’s notes were in decline in Wednesday’s activity, traders said.

The 6.05% notes due 2034 dropped 1¾ points to close at 112¼ bid.

The San Francisco-based bankrupt electric utility’s structure saw negativity after a group made up of creditors, wildfire victims and other stakeholders said that it supports ending the company’s exclusive right to propose a restructuring plan.

The group argued that ending the exclusivity would allow for competition in the development of a plan, increasing the chance of giving the best outcome to those affected most by its bankruptcy.

PG&E’s plan would see an $8.4 billion cap in wildfire victim payouts, retaining shareholder value.

In a bankruptcy court hearing later this month, a judge will decide on whether or not to terminate the exclusivity period.

“It seems more likely that the judge will throw it out,” a trader said. “They might realize that there are too many stakeholders wanting in, so ending exclusivity could mean a cleaner process.”

The company recently argued that the court should extend the exclusivity period past the most recent deadline.

U.S. Steel falls

Meanwhile, U.S. Steel’s issues were seen falling, market sources said.

The 6¼% senior notes due 2026 lost 1½ points to close at 81½ bid. The 6 7/8% senior notes due 2025 shed 1¾ points to close at 87½ bid.

On Wednesday, S&P Global Ratings revised its view of the Pittsburgh-based steel manufacturer to negative from stable.

The agency cited the company’s decision to purchase a 49.9% interest in competitor Big River Steel with $700 million drawn from a $2 billion asset-based loan revolver.

S&P said that a debt-financed purchase could factor into a downgrade if market conditions weaken.

The company announced the purchase on Tuesday, stating that it gives it a more diversified portfolio of products.

As part of the purchase agreement, the company may decide to acquire the remaining 50.1% over the next four years.

Teva, Mallinckrodt down

In the pharmaceutical space, Teva’s paper was under pressure, traders said.

The 2.2% senior notes due 2021 shaved off ¾ point to close at 91¾ bid. The 2.8% senior notes due 2023 fell 1½ points to close at 80 bid.

The Petach Tikva, Israel-based drug producer and others in the space were pushed lower after news broke that industry peer Johnson & Johnson had reached a $20.4 million settlement with Ohio’s Cuyahoga and Summit counties in the latest effort to avert a trial over opioid-related claims.

“It brought back into focus just how vulnerable the weaker names like Teva and Mallinckrodt are to any coming litigation,” a trader said.

In its most recent earnings report, Teva said that it had set aside $646 million for potential settlements.

Many pharma names are exploring the feasibility of using Purdue Pharma’s blanket settlement as a model for their own, or joining the settlement outright.

Staines-upon-Thames, England-based drug name Mallinckrodt’s notes were also moving negatively.

The 5¾% senior notes due 2022 slipped 3 points to close at 32 bid. The 5½% senior notes due 2025 lost 1 point to close at 27 bid.

Oil names negative

As oil futures went negative, the trend was mirrored in distressed energy tranches, market sources said.

The negativity was precipitated by reports of a rise in U.S. crude oil inventories.

West Texas Intermediate crude oil futures for November delivery declined by 98 cents to settle the session at $52.64 per barrel.

North Sea Brent crude oil futures for December delivery ended the day at $57.69 per barrel after a $1.20 loss.

Oklahoma City-based independent oil and gas producer Chesapeake Energy’s issues lost ground.

The 8% senior notes due 2025 declined by ¼ point to close at 71¼ bid. The 8% senior notes due 2027 lopped off ½ point to close at 68¼ bid.

London-based contract driller Valaris’ paper also ended on weaker footing.

The 5.2% senior paper due 2025 lost 2¼ points to close at 49½ bid. The 7¾% senior notes due 2026 gave back ¾ point to close at 51½ bid.

Houston-based oil and gas engineering company McDermott’s notes followed a negative path.

The 10 5/8% senior notes due 2024 declined by 3½ points to close at 19 bid.

WeWork lower

Elsewhere, WeWork’s issues were under water, traders said.

The 7 7/8% senior notes due 2025 lost 1¾ points to close at 85 bid.

The New York City-based coworking giant has come under negative attention after a valuation spat led to the withdrawal of its initial public offering.

In the aftermath, the chief executive officer tendered his resignation and Fitch Ratings lowered the company to CCC+.

Dean Foods trails

Dairy name Dean Foods’ paper was seen trailing in Wednesday’s activity, market sources said.

The 6½% senior notes due 2023 shed ¾ point to close at 52¼ bid.

The Dallas-based dairy products producer’s paper has seen a positive trend since announcing that it was enacting its operational plan without having to sell assets following a strategic alternatives review.

Since then, the company’s chief financial officer resigned.

© 2015 Prospect News.
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