Frontier Communications declines as interest payment skipped; Whiting notes active

By James McCandless

San Antonio, March 16 – The distressed debt space started the week under pressure as the economic impact of the coronavirus was laid bare on Monday.

Frontier Communications Corp.’s notes declined after the company announced that it would be forgoing an interest payment.

Satellite name Intelsat SA’s issues also trailed as the day went on.

In the oil and gas space, Whiting Petroleum Corp.’s paper varied in direction after the company said it was reducing its 2020 capital budget.

Sector peer California Resources Corp.’s notes dropped following the termination of the company’s exchange offers.

As oil futures saw more losses, Antero Resources Corp.’s and Diamond Offshore Drilling, Inc.’s issues were similarly weaker.

Meanwhile, drug maker Mallinckrodt plc’s paper took a hit after a court ruled for a change to the way the government calculates rebates for a popular pharmaceutical.

Generics name Endo International plc’s notes were also negative.

In retail, Rite Aid Corp.’s issues slid despite the company raising its forward guidance in preparation for an analyst event.

Frontier, Intelsat trail

Frontier Communications’ notes declined on Monday, traders said.

The 10½% senior notes due 2022 lost 3 points to close 34 bid. The 11% senior notes due 2025 dipped 4 points to close at 34 bid.

Before the open on Monday, the Norwalk, Conn.-based wireline communications company said it has elected to defer making the interest payments due on March 16 on some of its senior unsecured notes, Prospect News reported.

The company will enter a 60-day grace period as it continues constructive discussions with its bondholders regarding its capital structure.

The news confirms last week’s reports that the company was planning to forgo the payments as it prepares to file for Chapter 11 bankruptcy.

“It will be interesting to see how all of this downturn will affect their ability to strike a deal and eventually exit,” a trader said.

Luxembourg-based satellite operator Intelsat’s issues also trailed.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 fell 11 points to close at 25½ bid. The 9½% senior notes due 2023 shed 3¼ points to close at 44¾ bid.

Whiting varies

Elsewhere, in the oil and gas space, Whiting Petroleum’s paper varied in direction, market sources said.

The 6¼% senior notes due 2023 declined by 4½ points to close at 15 bid. The 6 5/8% senior notes due 2026 rose 1 point to close at 16½ bid.

On Monday morning, the Denver-based independent oil and gas producer announced that its 2020 capital budget range would be between $400 million and $435 million.

The move represents a reduction of 30%.

Within the next month, the company expects to drop one rig and one production crew.

In a statement, president and chief executive officer Bradley Holley said that volatile commodity prices necessitated the need for reduced development activity and “plan to maintain a lower level until we see a sustained commodity price recovery.”

Crude prices fell below $30 per barrel on Monday.

CalRes drops

Sector peer California Resources’ notes took a drop, traders said.

The 6% senior notes due 2024 were pushed down 1¾ points to close at 10 bid. The 8% senior secured notes due 2022 slid 3¼ points to close at 4¾ bid.

As another energy company making shifts to cope with weakening market conditions, the Los Angeles-based producer announced Monday that it terminated its private exchange and subscription offers and consent solicitation relating to its outstanding 8% senior secured second-lien notes due 2022, 5½% senior notes due 2021 and 6% senior notes due 2024.

The company also terminated the private subscription agreements it entered into with some significant holders of the notes.

The company said in its release that as a result of new developments in the commodities and financial markets, the offers are “inadvisable and impractical.”

“I don’t see a lot of these over-levered energy names coming out of the other side without a restructure,” a trader said.

The offer began on Feb. 20 and was set to expire on March 18.

Oil futures fall

Oil futures saw more losses, transferring to negativity for distressed energy names, market sources said.

With fears of the economic impact of the coronavirus already bearing fruit, futures continued to slide.

West Texas Intermediate crude oil futures for April delivery shed $3.03 to settle the day at $28.70 per barrel.

North Sea Brent crude oil futures for May delivery landed at $30.05 per barrel after a $3.80 spill.

Antero Resources, another Denver-based producer, saw its issues end with similar weakness.

The 5 1/8% senior notes due 2022 lost 1¼ points to close at 46¼ bid. The 5 5/8% senior notes due 2023 shed 4 points to close at 32 bid.

Houston-based contract driller Diamond Offshore’s paper joined the trend.

The 7 7/8% senior notes due 2025 dived 11½ points to close at 44 bid.

Mallinckrodt negative

Meanwhile, drug maker Mallinckrodt’s notes took a hit, traders said.

The 5¾% senior notes due 2022 dipped 10 points to close at 64 bid. The 4 7/8% senior notes due 2020 cratered 23 points to close at 68 bid.

The Staines-upon-Thames, England-based pharmaceuticals name confirmed on Monday morning that subsidiary Mallinckrodt ARD LLC received a decision from a U.S. district court to pay $650 million to the Department of Health and Human Services and the Centers for Medicare and Medicaid Services.

The ruling reflects a recent change from the relevant agencies in how it calculates Medicaid rebates for its popular Acthar Gel.

Barring a stay or a granted appeal, the company would pay the $650 million from a period of Jan. 1, 2013 to present.

The company is facing a separate government lawsuit that alleges that it artificially inflated the price of Acthar Gel.

Dublin-based peer Endo’s issues were also negative.

The 6% senior notes due 2025 declined by 3 points to close at 67 bid. The 6% senior notes due 2023 fell 5 points to close at 68½ bid.

Rite Aid slides

In the retail space, Rite Aid’s paper slid with the rest of the market, market sources said.

The 6 1/8% senior notes due 2023 shed 3¼ points to close at 81 bid.

The losses come despite the Camp Hill, Pa.-based drug store chain raising its forward guidance in anticipation of an analyst event.

The company said that it expects $21.9 billion and $21.925 billion in 2020 fiscal revenue and same-store sales growth between 1% and 1.1%.

Concurrently, the company announced a turnaround effort that includes new branding, a change in product offerings and an appeal to a younger demographic.

Rite Aid is still recovering from two failed mergers in recent years, one with Walgreens and one with Albertsons, increasing its debt load to stay afloat along the way.

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