PG&E higher as wildfire weakens; Frontier Communications eyed as fund pushes bankruptcy

By James McCandless

San Antonio, Oct. 30 – The distressed debt space eyed movements in the utilities and telecom space on Wednesday.

PG&E Corp.’s notes pushed higher, further pushing away from recent lows as a Northern California wildfire weakens.

Meanwhile, Frontier Communications Corp.’s issues varied amid news that a hedge fund is pushing the company to file for bankruptcy.

Sector peer Intelsat SA’s paper diverged in the wake of its third-quarter earnings release.

In health care, Community Health Systems, Inc.’s notes dipped after announcing an exchange offer and releasing its third-quarter results.

Business software name Exela Technologies, Inc.’s issues also went negative as sale talks between it and a private equity firm ended.

As oil futures declined, weakness was also seen in Extraction Oil & Gas, Inc.’s and Whiting Petroleum Corp.’s paper. McDermott International, Inc.’s notes gained.

Retailer Rite Aid Corp.’s issues were under pressure as it received a ratings downgrade.

PG&E higher

PG&E’s notes continued to push higher, traders said.

The 6.05% notes due 2034 rose 9 points to close at 101 bid. The 3½% senior notes due 2020 picked up 4 points to close at 94½ bid.

On Monday, the 6.05% notes jumped up 5½ points.

Over the last two trading sessions, the San Francisco-based bankrupt electric utility’s structure was rebounding from lows.

Wildfires that have spread across California have seen partial containment over the last few days as the market worries that the utility may have had a hand in starting one of the blazes.

In bankruptcy court on Tuesday, a judge ordered mediation between the company and other parties in order to finalize a restructuring plan.

Frontier active

Meanwhile, in telecom, Frontier’s issues were seen trading through the day with some paper higher and one tranche unmoved, market sources said.

The 10½% senior notes due 2022 gained ½ point to close at 48½ bid. The 11% senior notes due 2025 held level at 47½ bid.

News broke on Wednesday that hedge fund Discovery Capital Management is pushing for the Norwalk, Conn.-based wireline telecom name to file for bankruptcy as soon as possible.

The firm, representing some investors, argued that no action would limit access to liquidity and market confidence.

Earlier in the year, Aurelius Capital argued that a bankruptcy would not be in the best interest of stakeholders.

The company is due to start restructuring talks with creditors soon.

Intelsat diverges

Sector peer Intelsat’s paper also diverged in direction, traders said.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 shaved off ½ point to close at 94½ bid. Intelsat (Luxembourg) SA’s 8 1/8% senior paper due 2023 added 1¼ points to close at 85¾ bid.

On Tuesday morning, the company released a lukewarm third-quarter earnings report.

Earnings were pegged as $1.05 per share, and revenues came in at $506.66 million.

Community Health dips

In health care, Community Health’s notes took a dip, market sources said.

The 6 7/8% senior notes due 2022 fell 1¼ points to close at 77¾ bid. The 8 1/8% senior secured notes due 2024 declined by 4½ points to close at 77 bid.

After the close on Tuesday, the Franklin, Tenn.-based hospital operator was one of the latest names to put out third-quarter results.

The company showed a third-quarter loss of 29 cents per share, better than the 55 cents per share loss that analysts had predicted.

Revenues also beat expectations at $3.25 billion.

Concurrently, the company announced that subsidiary CHS/Community Health Systems, Inc. plans to begin an offer to exchange any and all of its $2,632,000,000 of existing 6 7/8% senior unsecured notes due 2022 for two series of new notes, Prospect News reported.

The company is eyeing other pricings and add-ons according to additional reports.

Exela negative

Software name Exela’s issues also saw negativity, traders said.

The 10% senior secured notes due 2023 slid 4½ points to close at 46 bid.

The Irving, Tex.-based business software developer announced that talks for a potential sale between the company and a private equity firm have been terminated and the independent board committee formed to study the possibility had been disbanded.

The company also said that three members of its board of directors had resigned from their positions for unrelated reasons.

Oil declines

As oil futures lost ground, distressed energy tranches skewed the same way, market sources said.

Futures moved higher as the U.S. reported a 6 million barrel rise in its stockpile.

West Texas Intermediate crude oil futures for December delivery lost 48 cents to settle at $55.06 per barrel.

North Sea Brent crude oil futures for December delivery finished at $60.61 per barrel after a 98 cent loss.

Denver-based independent oil and gas producer Extraction Oil & Gas’ paper followed futures downward.

The 7 3/8% senior paper due 2024 dived 6¾ points to close at 43 bid. The 5 5/8% senior notes due 2026 lost 3½ points to close at 42 bid.

Whiting Petroleum, another Denver-based producer, saw its notes follow the sector trend.

The 6¼% senior notes due 2023 declined by 1¼ points to close at 76¼ bid. The 6 5/8% senior notes due 2026 gave back 3¾ points to close at 65½ bid.

Houston-based oil and gas engineering name McDermott’s issues improved, going against the grain.

The 10 5/8% senior notes due 2024 garnered 1 point to close at 19½ bid.

Rite Aid lower

Retailer Rite Aid’s paper was under pressure, traders said.

The 6 1/8% senior notes due 2023 shaved off ½ point to close at 85¾ bid.

On Wednesday, the Camp Hill, Pa.-based drug store chain received a ratings downgrade from Fitch Ratings.

The agency lowered the company’s long-term issuer default rating, citing continuing operational challenges as its market position remains threatened in an increasingly competitive sector.

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