U.S. Steel bonds drops after guidance cut; Rite Aid notes better on ratings upgrade

By James McCandless

San Antonio, Dec. 20 – Manufacturers and retailers took up the bulk of attention in the distressed debt market on Friday.

United States Steel Corp.’s notes dropped after the company announced a guidance cut, layoffs and other measures.

Meanwhile, in retail, Rite Aid Corp.’s issues moved higher following a ratings upgrade for its unsecured notes.

Sector peer Bed Bath & Beyond Inc.’s paper varied in direction.

Weaker oil futures spurred similar movements from Superior Energy Services, Inc.’s and California Resources Corp.’s notes while Antero Resources Corp.’s issues diverged.

Elsewhere, utilities name PG&E Corp.’s paper was active but unchanged after a week of tussling with California over its restructuring plan.

In the telecom space, Intelsat SA’s notes shifted higher while Frontier Communications Corp.’s issues saw mixed movements.

U.S. Steel drops

U.S. Steel’s notes dropped by the end of Friday, traders said.

The 6¼% senior notes due 2026 fell 3 points to close at 88½ bid. The 6 7/8% senior notes due 2025 declined by 1½ points to close at 96 bid.

The Pittsburgh-based steel manufacturer made several announcements after the market close on Thursday.

The company said that it had reduced its guidance for fourth-quarter earnings, expecting a loss of $1.15 where analysts are expecting a 62 cent loss per share.

The company also reduced its dividend to 1 cent per share from 5 cents per share and will stop share buybacks.

The name also plans to idle a Detroit-area plant by April 1, 2020 and lay off more than 1,500 workers.

Rite Aid better

Meanwhile, in retail, Rite Aid’s issues moved better, market sources said.

The 6 1/8% senior notes due 2023 improved by 1 point to close at 89 bid. The 7.7% senior notes due 2027 rose 2¼ points to close at 75 bid.

During the session, S&P Global Ratings issued an upgrade for the Camp Hill, Pa.-based drug store chain.

The agency raised the ratings on the senior unsecured notes due 2027 and 2028, citing the company’s completion of a cash tender offer to repurchase $18 million of its 2027 notes and $39 million of its 2028 notes at a discount.

Despite this, S&P maintains that the company’s capital structure is unsustainable.

Rite Aid has seen positivity over the last few trading days after reporting a surprisingly positive third quarter, showing a 54 cents per share profit where a 3 cents per share profit was expected.

Union, N.J.-based sector peer Bed Bath & Beyond’s long-term paper varied in direction.

The 5.165% senior notes due 2044 picked up 1½ points to close at 72½ bid. The 4.915% senior notes due 2034 lost 1 point to close at 75¼ bid.

Oil trends negative

Weaker oil futures were mirrored by distressed energy names, traders said.

West Texas Intermediate crude oil futures for January delivery shifted down 74 cents to settle at $60.44 per barrel.

North Sea Brent crude oil futures for February delivery ended at $66.14 per barrel after a 40 cent loss.

Houston-based oilfield services provider Superior Energy’s notes were under pressure.

The 7 1/8% senior notes due 2021 shed 1¼ points to close at 85 bid. The 7¾% senior notes due 2024 dipped ½ point to close at 67½ bid.

Los Angeles-based independent oil and gas producer California Resources’ issues followed the sector trend.

The 6% senior notes due 2024 slipped 1 point to close at 35 bid. The 8% senior secured notes due 2022 gave back 1 point to close at 42½ bid.

Denver-based producer Antero Resources’ paper diverged in direction.

The 5 5/8% senior paper due 2023 garnered 1¾ points to close at 82½ bid. The 5% senior notes due 2025 fell 1¼ points to close at 74¼ bid.

PG&E active, flat

Elsewhere, utilities name PG&E’s notes were active but rigid by the close, market sources said.

The 6.05% notes due 2034 held level at 106 bid.

In the past week, the San Francisco-based bankrupt electric utility’s structure was active as negotiations between the company and several parties persisted.

After California governor Gavin Newsom rejected its $13.5 billion settlement with wildfire victims and $11 billion insurance settlement, the parties revised their agreements to remove a provision requiring Newsom’s approval.

Subsequently, the two settlements were approved in bankruptcy court.

Its overall reorganization plan is being reworked and would need the approval of a governor-appointed commission of regulators.

Intelsat higher

In the telecom space, Intelsat’s issues shifted higher, traders said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 added 2½ points to close at 60½ bid. The 9½% senior notes due 2023 rose 1¾ points to close at 70¾ bid.

The Luxembourg-based satellite operator received another C-band spectrum setback this week after legislation meant to outline how to divvy up the proceeds from a potential spectrum auction lost support and failed to pass.

The bill would have seen half going to satellite names and half going to the Treasury.

In the new year, terms are expected to be set by the Federal Communications Commission.

“It’s like with every new development their slice of the pie gets smaller and smaller,” a trader said.

© 2015 Prospect News.
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