McDermott notes rise after forbearance news; U.S. Steel eyed as tariffs announced

By James McCandless

San Antonio, Dec. 2 – A new week in the distressed debt space started with attention paid to names in energy and manufacturing.

McDermott International, Inc.’s notes rose after announcing that it had entered into a forbearance agreement with some holders to access additional financing.

Despite higher oil futures, Chesapeake Energy Corp.’s and Southwestern Energy Co.’s issues dipped while Whiting Petroleum Corp.’s paper diverged.

Manufacturer United States Steel Corp.’s notes varied as the U.S. government imposes steel tariffs on Argentina and Brazil.

Sector peer AK Steel Holding Corp.’s issues were active but unchanged.

Meanwhile, in utilities, PG&E Corp.’s paper shifted lower as it continues to work through its bankruptcy case.

In the retail space, Bed Bath & Beyond Inc.’s notes saw mixed activity as PetSmart, Inc. was lifted.

McDermott rises

McDermott’s notes were rising in the Monday session, traders said.

The 10 5/8% senior notes due 2024 gained ½ point to close at 7½ bid.

Early Monday, the Houston-based oil and gas engineering company announced that it entered into a forbearance agreement with the holders of more than 35% of its 10 5/8% senior notes due 2024 and was granted access to tranche B of its $1.7 billion super-priority senior secured credit facility, Prospect News reported.

The noteholders agreed to forbear from exercising any rights related to the interest payment due on Nov. 1, subject to certain conditions.

The company is in talks with additional creditors to potentially join the agreement in the coming days.

The forbearance period lasts until Jan. 15.

Tranche B provides the company with a $250 million term loan and a $100 million letter-of-credit facility.

The structure has reached recent lows as McDermott posted underperforming quarterly results and hired external advisers.

Oil names negative

Despite oil futures moving higher, distressed energy tranches were pushed under, market sources said.

Crude futures saw a small gain after OPEC committed to making more output cuts.

West Texas Intermediate crude oil futures for January delivery rose 79 cents to settle at $55.96 per barrel.

North Sea Brent crude oil futures for February delivery finished at $60.92 per barrel after a 43 cent pickup.

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

The 8% senior notes due 2025 shaved off ½ point to close at 48½ bid. The 8% senior notes due 2027 lost 1 point to close at 46¾ bid.

Spring, Tex.-based producer Southwestern Energy’s paper also fell.

The 7¾% senior notes due 2027 dropped 3 points to close at 84¾ bid.

Denver-based sector peer Whiting Petroleum’s notes diverged.

The 6¼% senior notes due 2023 held level at 68 bid. The 6 5/8% senior notes due 2026 declined by 1½ points to close at 56¾ bid.

U.S. Steel active

Manufacturer U.S. Steel’s issues varied in direction, traders said.

The 6.65% senior notes due 2037 picked up ½ point to close at 78½ bid. The 6¼% senior notes due 2026 slid 1¾ points to close at 86¼ bid.

The Pittsburgh-based steel manufacturer’s structure became active on Monday after president Donald Trump announced the reinstatement of steel tariffs on Argentina and Brazil.

“It’s kind of an overreaction because the steel industries of those countries are relatively small,” a trader said. “It’s too early to see what kind of impact this will have.”

The company has seen increased scrutiny in the last half of the year after it announced in October that it would acquire about half of competitor Big River Steel for $700 million and reported underperforming earnings.

West Chester, Ohio-based peer AK Steel’s paper was active but unchanged.

The 7% senior notes due 2027 remained at 86¼ bid.

PG&E lower

Meanwhile, in utilities, PG&E’s notes shifted lower, market sources said.

The 6.05% notes due 2034 lost ¼ point to close at 105¾ bid.

On Friday, the San Francisco-based bankrupt electric utility said that it determined that no lives or structures were lost in 2019 fires that may have been caused by its distribution lines.

The cause of the 2019 Kincade fire has not been determined.

Also last week, a bankruptcy court judge ruled that the company is subject to the legal doctrine of inverse condemnation, holding it liable for fires caused by its equipment.

In a separate matter, the judge signaled that he was likely to approve a proposed $11 billion insurance settlement.

Bed Bath flat to lower

In the retail space, Bed Bath & Beyond’s long-term issues were mixed, traders said.

The 5.165% senior notes due 2044 was level at 70½ bid. The 4.915% senior notes due 2034 dropped 4 points to close at 73 bid.

Last week, Bank of America analysts said that the bank has renewed confidence in the Union, N.J.-based retail chain and its new chief executive officer Mark Tritton.

The analysts said that the upgrade is based on the potential of new operations and the chance for higher online and in-store sales.

Phoenix-based pet supplies name PetSmart’s paper was lifted.

The 8 7/8% senior notes due 2025 added ¼ point to close at 89¼ bid. The 5 7/8% senior paper due 2025 picked up ½ point to close at 99 bid.

© 2015 Prospect News.
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