PG&E notes up after regulators approve restructuring; Party City jumps in retail space

By James McCandless

San Antonio, May 29 – The holiday-shortened week came to a close, marked by a positive tone in the distressed debt market.

PG&E Corp.’s notes improved after state regulators approved its plan for reorganization as the utility seeks to exit bankruptcy.

Meanwhile, in retail, Party City Holdco Inc.’s issues jumped higher after announcing a transaction support agreement with creditors.

Sector peer J.C. Penney Co., Inc.’s paper dipped.

In the energy space, Occidental Petroleum Corp.’s notes rose after the company cut its common stock dividend as a cost cutting measure.

As oil futures ended the week on a positive note, the distressed issues of Whiting Petroleum Corp., SM Energy Co. and Valaris plc all varied in direction.

Elsewhere, pharmaceutical name Endo International plc’s paper shifted up after announcing early results of its exchange offers.

Drug maker Mallinckrodt plc’s notes were under pressure.

PG&E improves

PG&E’s notes improved as the week came to a close, traders said.

The 6.05% notes due 2034 gained ¼ point to close at 114¼ bid.

After the close on Thursday, the San Francisco-based bankrupt electric utility and Pacific Gas and Electric Co. announced that their Chapter 11 plan of reorganization was approved on Thursday by the California Public Utilities Commission, Prospect News reported.

Part of the approval means that the regulator also green-lit a number of measures to improve PG&E’s governance process, operational structure and safety performance.

Concurrently, the company was granted its request to issue new debt and securities to finance its bankruptcy exit.

Gaining approvals from regulators and California governor Gavin Newsom proved to be one of the more difficult parts of the process, marked by negotiations on greater oversight and governance changes.

The plan recently won a majority vote of wildfire victim claimants.

The utility expects to exit bankruptcy at the end of June.

Party City jumps

Meanwhile, in the retail space, Party City’s issues jumped higher, market sources said.

The 6 1/8% senior notes due 2023 shot up 11 points to close at 16½ bid. The 6 5/8% senior notes due 2026 pushed up 11¾ points to close at 15¾ bid.

During the Friday session, the Elmsford, N.Y.-based party supplies chain announced a transaction support agreement with holders of more than 52% of the two series of notes.

The actions are expected to deleverage the company’s balance sheet by about $450 million while raising $100 million in new capital.

In June, the company expects to start an exchange offer for the 2023 and 2026 issues, for which holders would receive shares of common stock, $100 million of 10% second-lien senior secured notes due 2026 and $185 million of first-lien variable-rate senior secured notes due 2025.

“Everyone in the sector is going to have to do some kind of shuffle,” a trader said.

Party City will also seek amendments to the indentures of its existing notes and launch a rights offering.

Meanwhile, Plano, Tex.-based department store operator J.C. Penney’s paper dipped.

The 7.4% senior notes due 2037 gave back 1¼ points to close at 1¾ bid.

Occidental rises

In the energy space, Occidental Petroleum’s notes rose, traders said.

The 2.9% senior notes due 2024 tacked on ½ point to close at 80 bid. The 2.7% senior notes due 2022 grabbed ¼ point to close at 92¼ bid.

Around noon ET on Friday, news broke that the Houston-based independent oil and gas producer’s board of directors voted to slash its common stock dividend to 1 cent from 11 cents.

“When oil is at $30 a barrel, what else can you do,” a trader said.

The board also reelected all 11 board members, including chief executive officer Vicki Hollub.

The company projects that the measure would save $360 million a year.

Shareholders authorized the company to sell 400 million common shares.

On Thursday, reports indicated that the company was the subject of a lawsuit by a group of shareholders and creditors, claiming billions of dollars in losses as the reason.

Oil futures up

As oil futures ended the week on a positive note, distressed tranches varied, market sources said.

West Texas Intermediate crude oil futures for July delivery picked up $1.78 to finish the week at $35.49 per barrel.

North Sea Brent crude oil futures for August delivery capped the day at $37.84 per barrel after a $1.81 boost.

Denver-based producer Whiting Petroleum’s issues saw varying movements.

The 6¼% senior notes due 2023 shifted up ¾ point to close at 12 bid. The 6 5/8% senior notes due 2026 dropped ¾ point to close at 10½ bid.

Houston-based peer SM Energy’s paper was seen diverging.

The 6¾% senior paper due 2026 shaved off ½ point to close at 51 bid. The 6 5/8% senior notes due 2027 added ¼ point to close at 51¼ bid.

London-based contract driller Valaris’ notes were also mixed.

The 5.2% senior notes due 2025 rose ½ point to close at 6¾ bid. The 7¾% senior notes due 2026 lost ¼ point to close at 6 bid.

Endo gains

Elsewhere, pharmaceutical name Endo’s issues shifted up, traders said.

The 6% senior notes due 2025 picked up 3 points to close at 74½ bid. The 6% senior notes due 2023 garnered ¾ point to close at 78½ bid.

On Friday morning, the Dublin-based generic drug producer’s subsidiaries Par Pharmaceutical, Inc., Endo DAC, Endo Finance LLC and Endo Finco Inc. announced the early results of exchange offers and related consent solicitations for three series of senior notes, Prospect News reported.

The issuers also extended the early tender deadline for the existing 5 3/8% notes due 2023 to the expiration date, 11:59 p.m. ET on June 11.

By the early deadline originally on May 28, holders had tendered for exchange $1,367,838,000, or 95%, of the notes due 2023 and $1,161,322,000, or 96.78%, of the notes due 2025.

Staines-upon-Thames, England-based drug name Mallinckrodt’s paper was under pressure.

The 5¾% senior notes due 2022 fell 1 point to close at 22 bid.

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