Frontier rises after bankruptcy filing; J.C. Penney lower as interest payment skipped

By James McCandless

San Antonio, April 15 – In the middle of the week, the distressed debt market continued to place its attention on shifting ground in the telecom and retail sectors.

Frontier Communications Corp.’s notes rose after the company filed for Chapter 11 bankruptcy to enact a restructuring agreement with creditors.

Sector peer Intelsat SA’s issues moved to higher ground after a subsidiary announced that it would withhold an interest payment.

In the retail space, J.C. Penney Co., Inc.’s paper ended lower after the company also elected to forego an interest payment.

Cosmetics producer L Brands, Inc.’s notes picked up steam.

Aerospace name Bombardier Inc.’s issues dipped after receiving a ratings downgrade as the company attempts to restart some production capacity.

Meanwhile, WeWork Cos. Inc.’s paper slipped as the company warned of more layoffs in the near term.

More losses for oil futures led to weakness for Valaris plc’s notes while Chesapeake Energy Corp.’s and Whiting Petroleum Corp.’s issues had a mixed performance in the secondary.

Frontier rises

Frontier Communications’ notes rose during the Wednesday session, traders said.

The 10½% senior notes due 2022 gained 1¼ points to close at 31¼ bid. The 11% senior notes due 2025 picked up 1¼ points to close at 31¼ bid.

Late Tuesday, the Norwalk, Conn.-based wireline communications company filed for Chapter 11 bankruptcy, Prospect News reported.

In a news release, the company said that it has entered into a restructuring support agreement with bondholders representing more than 75% of its $11 billion in outstanding unsecured bonds.

As part of the agreement, the bondholders agreed to support implementation of a plan that is expected to reduce the company’s debt by more than $10 billion and provide significant financial flexibility to support continued investment in its long-term growth.

Holders of senior notes will receive a share of 100% of the common stock.

“They will come out of this significantly delevered, which is crucial to them remaining a going concern,” a trader said.

Intelsat higher

Sector peer Intelsat’s issues moved to higher ground, market sources said.

Intelsat Jackson Holdings SA’s 8½% senior notes due 2024 added ½ point to close at 59¼ bid. The 5½% senior notes due 2023 garnered ¾ point to close at 57½ bid.

In a Securities and Exchange Commission filing on Wednesday, the Luxembourg-based satellite operator’s subsidiary, Intelsat Jackson, said it has chosen to withhold an interest payment of about $125 million due on April 15 with respect to its outstanding 8½% senior notes due 2024, Prospect News reported.

The company has entered into a 30-day grace period before the nonpayment constitutes a default.

On Tuesday, news broke that the company is searching for financial backers for a DIP loan of about $750 million.

The loan would be a holdover to December, when the company expects to receive up to $4.85 billion from a C-band spectrum auction.

Also this week, the company withdrew its forward guidance and delayed its quarterly report to June.

J.C. Penney lower

Elsewhere, in the retail space, J.C. Penney’s paper ended lower, traders said.

The 5 7/8% senior notes due 2023 gave up 3¾ points to close at 46½ bid.

News reports over the last two days indicated that the Plano, Tex.-based department store chain is considering Chapter 11 bankruptcy as the coronavirus pandemic has forced the company to temporarily shutter its retail locations.

The company has hired AlixPartners LLP as restructuring advisers as it struggles with a $4 billion debt load.

During Wednesday trading, the retailer announced that it would be skipping a $12 million interest payment.

“They have been shredded recently,” a trader said. “They were already on the brink and their sales have taken a huge hit.”

Meanwhile, New York-based cosmetics name Revlon’s notes picked up steam.

The 5¾% senior notes due 2028 improved by 3½ points to close at 62 bid.

Bombardier dips

Aerospace name Bombardier’s issues saw a dip, market sources said.

The 8¾% senior notes due 2021 fell 1½ points to close at 80½ bid. The 7½% senior notes due 2024 chalked off 1 point to close at 72¼ bid.

During the Wednesday session, the Montreal-based aerospace manufacturer received a ratings downgrade from Moody’s Investors Service.

The agency cut its corporate family rating, probability of default rating, senior unsecured ratings and speculative grade liquidity rating.

The outlook is negative.

Moody’s cited the increased stress that Covid-19 will have on the company’s already weakened capital structure, noting that a sale of its transportation segment next year would not make a significant impact.

This past week, the company restarted some production at its Canada and U.K. facilities.

WeWork slips

Real estate name WeWork’s paper slipped by the end of the afternoon, traders said.

The 7 7/8% senior notes due 2025 shaved off ¼ point to close at 43¾ bid.

On Tuesday, reports indicated that the New York-based coworking startup is poised for a new round of layoffs as it reels from economic weakness that is keeping workers at home and out of offices.

The cuts are expected by the end of next month.

After its failed IPO last year, the company laid off 2,400 employees.

Last week, WeWork’s board of directors filed a lawsuit against major investor SoftBank for terminating a tender offer to purchase $3 billion of its stock.

Oil futures decline

More losses for oil futures led to negative trends in distressed energy tranches, market sources said.

West Texas Intermediate crude oil futures for May delivery dipped 24 cents to end the session at $19.87 per barrel.

North Sea Brent crude oil futures for June delivery capped the day at $27.69 per barrel after a $1.91 drop.

London-based contract driller Valaris’ notes also saw weakness.

The 5.2% senior notes due 2025 fell 1 point to close at 13 bid.

Oklahoma City-based independent oil and gas producer Chesapeake Energy’s issues varied in direction.

The 11½% notes due 2025 were pushed down 1¼ points to close at 10 bid. The 8% senior notes due 2025 tacked on ½ point to close at 7½ bid.

Denver-based producer Whiting Petroleum’s paper diverged.

The 6¼% senior notes due 2023 slid 1¾ points to close at 8¼ bid. The 6 5/8% senior notes due 2026 inched up ¼ point to close at 10¼ bid.

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