Chesapeake jumps on exchange, tender offers; PG&E down as victim settlement nears

By James McCandless

San Antonio, Dec. 4 – The distressed debt space continued to pay attention to newsmakers in the energy and utilities sectors on Wednesday.

Chesapeake Energy Corp.’s notes spiked higher after the company announced that it had started an exchange offer for five series of notes and a separate tender offer.

Sector peer Valaris plc’s issues gained as the company tries to ward off a proposal from an activist investor to make board nominations.

As oil futures rose, McDermott International, Inc.’s and Whiting Petroleum Corp.’s paper followed suit.

Utilities name PG&E Corp.’s notes declined amid news that the company is close to striking a $13.5 billion payout for wildfire victims.

Meanwhile, in the telecom sector, Frontier Communications Corp.’s issues fell following news of the appointment of a new chief executive officer.

Satellite operator Intelsat SA’s paper also shifted lower.

Dairy producer Dean Foods Co.’s notes slid as it works to gain approval for an asset sale in bankruptcy court.

Steelmaker United States Steel Corp.’s issues closed weaker.

Chesapeake spikes

Chesapeake Energy’s notes saw a sharp increase on Wednesday, traders said.

The 8% senior notes due 2025 gained 2¼ points to close at 54 bid. The 8% senior notes due 2027 jumped up 10 points to close at 58 bid.

Early Wednesday, the Oklahoma City-based independent oil and gas producer launched private offers of up to $1.5 billion of its new 11½% senior secured second-lien notes due 2025 in exchange for some of its outstanding senior notes, Prospect News reported.

To finance the offer, the company arranged a secured first-lien term loan facility with a group of commercial lenders.

Concurrently, the company also launched a tender offer on behalf of subsidiaries to purchase for cash any and all of the $617.81 million 6 7/8% senior notes due 2025.

“It’s good news, but it seems like a short-term fix,” a trader said. “I think if there isn’t an improvement in cash flow then a restructure is likely.”

Valaris gains

Sector peer Valaris’ issues also saw gains, market sources said.

The 5.2% senior notes due 2025 picked up 1½ points to close at 48 bid. The 7¾% senior notes due 2026 garnered 1¼ points to close at 46½ bid.

The London-based contract driller’s structure moved higher after activist investor and large shareholder Luminus Management sent a letter to shareholders proposing changes to its board of directors in a bid to improve performance.

Luminus owns 18.7% of the company’s equity.

Later in the day, Valaris responded by asserting that Luminus’ past proposals would significantly harm its financial profile and shareholder value.

Earlier in the year, the activist investor proposed a $2.5 billion special dividend that was ultimately not adopted.

Oil rises

Distressed energy tranches followed oil futures upward, traders said.

West Texas Intermediate crude oil futures for January delivery pushed up $2.33 to settle at $58.43 per barrel.

North Sea Brent crude oil futures for February delivery finished the session at $63.00 per barrel after a $2.18 rise.

Houston-based oil and gas engineering name McDermott’s paper ended stronger.

The 10 5/8% senior notes due 2024 improved by 1¼ points to close at 9 bid.

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

The 6¼% senior notes due 2023 rose ½ point to close at 67 bid. The 6 5/8% senior notes due 2026 shot up 1¾ points to close at 57½ bid.

PG&E declines

Elsewhere, in utilities, PG&E’s issues declined, market sources said.

The 6.05% notes due 2034 dropped 1 point to close at 105 bid.

News broke on Wednesday that the San Francisco-based bankrupt electric utility is nearing a deal to pay $13.5 billion out to victims of wildfires caused by its faulty equipment.

The company is proposing to pay the settlement with half cash and half stock.

On Tuesday, California state investigators concluded that the company failed to maintain and inspect its transmission systems, which led to recent wildfires.

Frontier, Intelsat lower

Meanwhile, in telecom, Frontier’s paper fell, traders said.

The 10½% senior notes due 2022 shaved off ¼ point to close at 45½ bid. The 11% senior paper due 2025 lost ½ point to close at 45½ bid.

After the close on Tuesday, the Norwalk, Conn.-based wireline communications name announced the appointment of telecom industry executive Bernie Han as its new president and CEO.

The appointment has immediate effect, with Han replacing Daniel McCarthy, who is also resigning his position on the board of directors.

Luxembourg-based satellite operator Intelsat’s notes also shifted lower.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 fell ¾ point to close at 44½ bid. The 9½% senior notes due 2023 shed 1 point to close at 56 bid.

Dean Foods slides

Meanwhile, Dean Foods’ issues slid by the close, market sources said.

The 6½% senior notes due 2023 dove 1½ points to close at 17 bid.

The Dallas-based dairy products producer is seeking court approval for three separate sales of non-core assets.

All three sales were marketed before its bankruptcy filing.

The company filed for Chapter 11 bankruptcy last month amid a tightening dairy market and increased competition.

U.S. Steel weaker

Manufacturing name U.S. Steel’s paper closed weaker, traders said.

The 6.65% senior notes due 2037 dipped 2 points to close at 78½ bid. The 6¼% senior paper due 2026 declined by 1 point to close at 87½ bid.

The Pittsburgh-based steel producer has seen heightened attention this week after president Donald Trump announced that tariffs would immediately be reinstated on steel products from Argentina and Brazil.

Another shift in the industry came on Tuesday after Cleveland-Cliffs agreed to acquire AK Steel in a $1.1 billion deal.

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