California Resources declines in earnings anticipation; Tenneco off after earnings beat

By James McCandless

San Antonio, Oct. 31 – The distressed debt market saw more focus on names releasing earnings in the last few days.

California Resources Corp.’s notes declined as the market anticipated the release of its third-quarter earnings.

Sector peer Valaris plc’s issues also moved negatively after releasing its own third-quarter report on Wednesday.

As oil futures continued to leak, McDermott International, Inc.’s and Whiting Petroleum Corp.’s paper fell.

Also, a name with earnings behind it, auto parts name Tenneco Inc.’s notes dipped despite beating earnings expectations.

In utilities, PG&E Corp.’s issues diverged as it restores power after mass blackouts and sees developments in bankruptcy court.

Hospital operator Community Health Systems, Inc.’s paper also saw mixed activity as its ratings were lowered.

Elsewhere, in telecom, Frontier Communications Corp.’s notes were under pressure as Intelsat SA’s issues moved in different directions.

CalRes declines

California Resources’ notes were seen declining throughout the day, traders said.

The 6% senior notes due 2024 fell 4¾ points to close at 14¼ bid. The 8% senior secured notes due 2022 dived 8 points to close at 29½ bid.

The Los Angeles-based independent oil and gas producer’s structure was under water throughout Thursday activity in anticipation of the company’s third-quarter earnings release, which came after the close.

“It’s being dragged down so people are expecting a loss,” a trader said before earnings were released.

The name’s structure has been a perennial target of distressed traders in the energy space, generally tracking oil futures.

Valaris down

Sector peer Valaris’ issues also moved in a negative direction, market sources said.

The 5.2% senior notes due 2025 lost 2¼ points to close at 52¼ bid. The 7¾% senior notes due 2026 shed 2¾ points to close at 52¾ bid.

After the close on Wednesday, the London-based contract driller reported its own third-quarter earnings, showing a loss.

The report showed a loss of $1.32 per share.

Revenues were underwhelming at $551 million.

The company has seen negative trends since completion of its merger in April.

Oil steps lower

More negativity in oil futures was joined by distressed energy tranches, traders said.

West Texas Intermediate crude oil futures for December delivery declined by 88 cents to settle at $54.18 per barrel.

North Sea Brent crude oil futures for December delivery ended the session at $60.23 per barrel following a 38 cent loss.

Houston-based oil and gas engineering company McDermott’s paper was seen falling.

The 10 5/8% senior notes due 2024 shaved off ½ point to close at 19 bid.

Denver-based producer Whiting Petroleum’s notes followed the trend.

The 6¼% senior notes due 2023 declined by 3¼ points to close at 73 bid. The 6 5/8% senior notes due 2026 gave back 3½ points to close at 62 bid.

Tenneco dips

Automotive name Tenneco’s issues dipped by the close, market sources said.

The 5% senior notes due 2026 fell ½ point to close at 79¾ bid.

The Lake Forest, Ill.-based automotive parts maker was another to release its third-quarter earnings results, making them public early Thursday.

The company reported a profit of $1.23 per share, better than what analysts had expected at 97 cents per share.

Revenues also topped estimates at $4.32 billion.

The company’s debt has been volatile over the last year as it alternates between surpassing quarterly predictions or missing them.

PG&E diverges

In the utilities space, PG&E’s paper diverged, traders said.

The 6.05% notes due 2034 tacked on ¼ point to close at 101¼ bid. The 3½% senior paper due 2020 shaved off ½ point to close at 92 bid.

During the Thursday session, the San Francisco-based bankrupt electric utility said that it has restored power to 328,000 customers.

The company cut off power to thousands in California to prevent worsening wildfire conditions.

Meanwhile, the company’s backstop commitment letters have been amended to extend the restructuring support agreement approval deadline to Nov. 20 from Oct. 31, Prospect News reported.

As previously reported, the backstop parties have agreed to fund up to $14 billion of proceeds to finance the proposed plan through the purchase of common stock of PG&E.

Community Health mixed

Health care name Community Health’s notes also saw mixed activity, market sources said.

The 6 7/8% senior notes due 2022 held level at 77¾ bid. The 8 1/8% senior secured notes due 2024 shed ¼ point to close at 76¾ bid.

S&P Global Ratings issued a downgrade for the Franklin, Tenn.-based hospital operator on Thursday.

The agency lowered the company to CC from CCC+ in reaction to the company’s announcement that it wants to exchange $2.6 billion of notes for 8% senior secured notes due 2027 and 6.875% senior unsecured notes due 2028.

The ratings on the notes were also lowered to CC.

Frontier lower

Elsewhere, in the telecom space, Frontier’s issues were under pressure, traders said.

The 10½ senior notes due 2022 lost ¾ point to close at 47¾ bid. The 11% senior notes due 2025 declined by ¼ point to close at 47¼ bid.

The market continues to react to Wednesday’s news that hedge fund Discovery Capital Management is publicly asking the Norwalk, Conn.-based wireline communications name to file for bankruptcy.

The fund argues that doing so would save face and stakeholder value.

“I think a restructure is on the way; it’s just a matter of what side they take as far as in court or out of court,” a market source said.

Other entities representing holders have already urged the company to handle a restructuring out of court.

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

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 ended level at 94½ bid. Intelsat (Luxembourg) SA’s 8 1/8% senior paper due 2023 dropped 1½ points to close at 84¼ bid.

© 2015 Prospect News.
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