PG&E bonds gain on settlement news; Mallinckrodt higher despite rating downgrade

By James McCandless

San Antonio, Dec. 9 – The distressed debt market started the week with a positive tone across several sectors.

PG&E Corp.’s notes gained after the company came to a settlement with California wildfire victims for $13.5 billion.

Meanwhile, in pharma, Mallinckrodt plc’s issues traded higher despite receiving a ratings downgrade.

Sector peer Endo International plc’s paper varied in direction.

In oil and gas, Valaris plc’s notes also diverged after receiving its own ratings downgrade late Friday.

Producer Antero Resources Corp.’s issues jumped up following its announcement of fee reductions and asset sales.

Despite negative oil futures, California Resources Corp.’s and Diamond Offshore Drilling, Inc.’s paper improved.

Elsewhere, satellite operator Intelsat SA’s notes pushed upward while wireline name Frontier Communications Corp.’s issues were flat to lower.

PG&E gains

PG&E’s notes gained in the utilities space, traders said.

The 6.05% notes due 2034 picked up 1½ points to close at 106 bid.

Late Friday, the San Francisco-based bankrupt electric utility said it struck a $13.5 billion settlement with the official committee of tort claimants and with firms representing individual claimants who sustained losses from the 2015 Butte Fire, 2017 Northern California Wildfires and 2018 Camp Fire, Prospect News reported.

The deal is subject to conditions and a confirmation in bankruptcy court.

“It moves them forward in the reorganization, and that’s the main goal,” a trader said.

Previously, the company had reached a $1 billion settlement with California public entities and an $11 billion settlement with insurance providers.

The news was followed on Monday that the name would take a pretax charge of $4.9 billion this quarter related to the settlements.

Mallinckrodt up

Meanwhile, in the pharma space, Mallinckrodt’s issues traded higher, market sources said.

The 4¾% senior notes due 2023 rose 3¾ points to close at 39 bid. The 4 7/8% senior notes due 2020 gained 2¼ points to close at 71¾ bid.

Moody’s Investors Service issued a downgrade for the Staines-upon-Thames, England-based drug maker’s subsidiary Mallinckrodt International Finance SA.

The agency lowered its corporate family rating, senior secured revolver ratings, term loan ratings and issue-level ratings.

Moody’s said it issued the downgrade on the increased probability of distressed exchanges in the run up to its April 2020 maturity wall.

The company recently completed an exchange offer for about $700 million of principal of unsecured notes for new second-lien secured notes with a longer maturity.

Dublin-based sector peer Endo’s paper varied in direction.

The 6% senior notes due 2025 added ½ point to close at 63 bid. The 6% senior notes due 2023 held level at 68 bid.

Valaris diverges

In oil and gas, Valaris’ notes were also eyed, traders said.

The 5.2% senior notes due 2025 shifted up 2 points to close at 48 bid. The 7¾% senior notes due 2026 shaved off ¼ point to close at 48½ bid.

The London-based contract driller received a ratings downgrade from Moody’s on Friday.

The agency cut the company’s corporate family rating, probability of default rating, senior unsecured notes rating and speculative grade liquidity rating.

Moody’s said that the company faces elevated credit risk going into next year and a higher likelihood of a distressed exchange due to continued pressure from an activist investor to reform its board of directors.

Antero jumps

Energy name Antero’s issues jumped up during the session, market sources said.

The 5 1/8% senior notes due 2022 improved by 2½ points to close at 85 bid. The 5 5/8% senior notes due 2023 shot up 4½ points to close at 74¾ bid.

On Monday morning, the Denver-based independent oil and gas producer announced fee reductions in its midstream operations and an asset sale program.

Over the next four years, the company expects to reduce midstream gathering, processing and transportation costs by $350 million.

Concurrently, in 2020, the company will pursue asset sales that it expects to net up to $1 billion.

Antero initiated the program with a $100 million sale of shares to Antero Midstream.

Oil names better

Despite negativity in oil futures, distressed energy tranches improved, traders said.

Oil futures were depressed in reaction to weak Chinese export figures.

West Texas Intermediate crude oil futures for January delivery shed 18 cents to settle at $59.02 per barrel.

North Sea Brent crude oil futures for February delivery ended at $64.25 per barrel after a 14 cent loss.

Los Angeles-based oil and gas producer California Resources’ paper rose.

The 6% senior paper due 2024 was lifted 4 points to close at 28½ bid. The 8% senior secured notes due 2022 tacked on 2 points to close at 35½ bid.

Houston-based driller Diamond Offshore’s notes were also positive.

The 5.7% senior notes due 2039 rose ¾ point to close at 55¼ bid. The 7 7/8% senior notes due 2025 garnered 2¾ points to close at 85½ bid.

Intelsat notes improve

Elsewhere, telecom name Intelsat’s issues pushed upward, market sources said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 gained ½ point to close at 46½ bid. The 9½% senior notes due 2023 improved by 1½ points to close at 58¾ bid.

The Luxembourg-based satellite operator’s structure continues to see heightened trading as it tries to work with the U.S. government over how to handle an auction for C-band spectrum.

After months of lobbying for a private auction as part of the C-Band Alliance, the Federal Communications Commission committed to a public auction.

The Senate is working on establishing a procedure for the auction, which is expected to start at some point next year.

Norwalk, Conn.-based wireline name Frontier’s paper was flat to lower.

The 10½% senior notes due 2022 closed level at 45¾ bid. The 11% senior paper due 2025 dipped 1 point to close at 45½ bid.

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