Diamond Offshore drops on ratings cut; energy tranches crash; Intelsat lower

By James McCandless

San Antonio, March 9 – A combination of a steep drop in energy prices and increasing alarm about the coronavirus led to dives in the distressed space.

Diamond Offshore Drilling, Inc.’s notes dropped after the company received a slate of ratings downgrades.

As oil prices continued to sink, Oasis Petroleum Inc.’s, SM Energy Co.’s and Whiting Petroleum Corp.’s issues dropped similarly.

Elsewhere, in the telecom space, Intelsat SA’s paper tracked lower in the wake of last week’s negative headlines.

Sector peer Frontier Communications Corp.’s notes were also trailing.

Utilities name PG&E Corp.’s issues were active but unchanged as the company seeks the approval of employee incentive plans.

Meanwhile, in pharmaceuticals, Mallinckrodt plc’s and Endo International plc’s joined the day’s negative trend.

Diamond Offshore drops

Diamond Offshore’s notes dropped in the Monday session, traders said.

The 3.45% senior notes due 2023 dived 24½ points to close at 41½ bid. The 7 7/8% senior notes due 2025 lost 22 points to close 45 bid.

On top of price pressures in the oil and gas sector on Monday, the Houston-based contract driller received a slate of ratings downgrades.

Moody’s Investors Service lowered the company’s corporate family rating, senior unsecured notes ratings and speculative grade liquidity rating.

The agency cited its expectation that its earnings and cash flow would be lower than previously expected for 2020 and that the offshore drilling sector would continue to experience weakness.

The outlook remains negative.

Oil tanks

As oil prices continued to sink, distressed energy tranches saw similar drops, market sources said.

A disagreement over output within OPEC and increasing coronavirus worries combined to send energy futures lower.

West Texas Intermediate crude oil futures for April delivery was knocked down $10.15 to close at $31.13 per barrel.

North Sea Brent crude oil futures for May delivery finished at $34.36 per barrel after a $10.91 decline.

Houston-based independent oil and gas producer Oasis Petroleum’s issues suffered some of the heavier losses.

The 6 7/8% senior notes due 2022 crashed 42¼ points to close at 31¾ bid. The 6 7/8% senior notes due 2023 declined by 45¾ points to close at 25½ bid.

Denver-based producer SM Energy’s paper followed the trend.

The 6 5/8% senior paper due 2027 fell 29 points to close at 42 bid. The 6¾% senior paper due 2026 shifted down 30¼ points to close at 42 bid.

Whiting Petroleum, another Denver-based producer, saw its notes move under water.

The 6¼% senior notes due 2023 moved down 20 points to close at 16 bid. The 6 5/8% senior notes due 2026 lost 15 points to close at 15½ bid.

“Some of the weaker names may not survive March,” a trader said. “A few have some maturities coming up that may force a restructure. I’m not sure that anybody would file this week, but the chances increase as we get closer to April.”

Intelsat, Frontier lower

Elsewhere, in the telecom space, Intelsat’s issues tracked lower, traders said.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 gave back 5½ points to close at 75 bid. Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 shed 2¼ points to close at 32¼ bid.

About $21 million of the 5½% notes traded.

The Luxembourg-based satellite provider’s structure saw weakness with the rest of the market as it grapples with its position in a future C-band spectrum auction.

The company was hit with negative headlines last week that alleged that two large holders sold off a large amount of stock based on information that was not public at the time.

An article in the New York Post claimed a meeting between the name’s chief executive officer and a senior official at the Federal Communications Commission that had not been made public at the time of the sale.

In the last few weeks, the FCC has solidified rules for a spectrum auction for December, laying out the revenue distribution that is expected to net Intelsat about $4.85 billion.

The name had lobbied the agency for months to raise its revenue share.

Norwalk, Conn.-based wireline telecom name Frontier’s paper was also trailing.

The 10½% senior paper due 2022 shed 9 points to close at 35 bid. The 11% senior paper due 2025 declined by 8½ points to close at 31½ bid.

PG&E active, flat

Utilities name PG&E’s notes were active but unchanged, market sources said.

The 6.05% notes due 2034 held level to close at 116¼ bid.

By the close, about $19 million of the notes changed hands.

News spread on Friday that the San Francisco-based bankrupt electric utility is working to gain court approval for short-term and long-term employee incentive plans.

The plans would pay a maximum of $266 million and $187.8 million, respectively.

The short-term plan would envelop about 10,000 employees and senior executives while the long-term plan would apply to 400 senior employees.

Mallinckrodt, Endo negative

Meanwhile, in pharmaceuticals, Mallinckrodt’s issues joined the negative trend, traders said.

The 5 5/8% senior notes due 2023 dipped 4 points to close at 40 bid.

The Staines-upon-Thames, England-based drug producer’s structure saw its fifth trading day of negativity, anchored on last week’s news that the U.S. government had filed a lawsuit against it.

The government claims that the company’s Mallinckrodt ARD LLC subsidiary defrauded Medicaid by inflating the price of its popular Acthar Gel.

The 6% senior paper due 2025 slipped 1½ points to close at 72½ bid. The 6% senior paper due 2023 declined by 5 points to close at 74¼ bid.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.