AMC notes improve as exchange offers start; Valaris gains despite ratings downgrade

By James McCandless

San Antonio, June 3 – The distressed debt market saw continued focus on retail-related and energy tranches on Wednesday.

AMC Entertainment Holdings, Inc.’s notes saw better levels as the company starts exchange offers on four series of notes.

Meanwhile, in energy, Valaris plc’s issues gained despite receiving a ratings downgrade following skipping an interest payment.

As oil futures gained, so too did the notes of Occidental Petroleum Corp. and SM Energy Co. Meanwhile, Antero Resources Corp.’s notes varied.

Manufacturing name Bombardier Inc.’s issues were boosted after announcing the completed sale of its regional jet segment.

Elsewhere, REIT CBL & Associates Properties, Inc.’s paper improved a day after announcing that it would forego an interest payment.

Sector peer Washington Prime Group Inc.’s notes dipped.

In the utilities space, PG&E Corp.’s issues extended a positive run into a fifth day.

AMC better

AMC’s notes moved to better levels by the end of the afternoon, traders said.

The 10½% notes due 2025 added 1½ points to close at 91 bid. The 5 7/8% senior subordinated notes due 2026 picked up 1¼ points to close at 29¼ bid.

The two tranches combined to see about $14 million trading.

On Wednesday, the Leawood, Kan.-based movie theater chain announced that it had started private exchange offers and related consent solicitations for four series of senior subordinated notes, including the 5 7/8% notes, Prospect News reported.

The company is offering to issue up to $640 million of new 12% cash/PIK second-lien secured notes due 2026 in exchange for the existing subordinated notes.

The offers will expire at 11:59 p.m. ET on June 30.

Concurrently, the company said that it has “substantial doubts” about its ability to remain a going concern and expects to report more than $2 billion in losses for the quarter.

“It looks like these subordinated holders are drawing the short stick,” a trader said.

Valaris rises

Meanwhile, in the energy space, Valaris’ issues were seen gaining, market sources said.

The 4 7/8% senior notes due 2022 improved by 3½ points to close at 13½ bid. The 7¾% senior notes due 2026 rose 1 point to close at 8½ bid.

About $13 million of the issues changed hands.

On Wednesday, S&P Global Ratings issued ratings downgrades for the London-based contract driller.

The agency lowered the company’s overall rating to D from CCC- and slashed all of its issue-level ratings to D.

S&P said that due to low crude prices, a weak outlook for the offshore drilling space and the distressed level of Valaris’ debt, S&P does not expect Valaris to pay a skipped interest payment.

The company said on Monday that it would skip a $26 million interest payment, entering a 30-day forbearance period.

Chapter 11 bankruptcy has been mulled by the name since April, reports indicated.

Oil sees gains

More gains for oil futures were largely matched by distressed energy names in the sector, traders said.

West Texas Intermediate crude oil futures for July delivery moved up 48 cents to cap the day at $37.29 per barrel.

North Sea Brent crude oil futures for August delivery finished at $39.79 after a 22 cent pickup.

Houston-based independent oil and gas producer Occidental Petroleum’s paper followed futures.

The 2.9% senior paper due 2024 grabbed 1½ points to close at 82 bid. The 2.7% senior notes due 2022 pushed up 1½ points to close at 94 bid.

Houston-based producer SM Energy’s notes moved with the trend.

The 5 5/8% senior notes due 2025 improved by 1¾ points to close at 54½ bid. The 6 5/8% senior notes due 2027 tacked on ½ point to close at 51 bid.

Denver-based peer Antero Resources’ issues varied in direction.

The 5 1/8% senior notes due 2022 gained ½ point to close at 73¾ bid. The 5 5/8% senior notes due 2023 shaved off ½ point to close at 60½ bid.

Bombardier boosted

Manufacturer Bombardier’s paper was boosted, market sources said.

The 7 7/8% senior notes due 2027 jumped up 9¼ points to close at 72 bid. The 7½% senior paper due 2025 was carried up 8½ points to close at 74 bid.

News broke on Monday that the Montreal-based aerospace manufacturer had closed a $550 million sale of its regional jet unit.

The division was sold to Mitsubishi Heavy Industries Ltd.

The company has recently ramped its production back up after temporarily closing facilities to comply with government mandates on the coronavirus pandemic.

CBL notes improve

Elsewhere, property name CBL’s notes were improving throughout the day, traders said.

The 5¼% senior notes due 2023 rose 2 points to close at 23 bid. The 4.6% senior notes due 2024 shifted up 2¾ points to close at 21¾ bid.

In Tuesday’s session, the Chattanooga, Tenn.-based real estate investment trust said that it would be skipping an $11.8 million interest payment on its 2023 notes.

The move triggered a 30-day forbearance period.

In April, the company was only able to collect about 27% of its rent and expects to collect about 25% to 30% for May.

Columbus, Ohio-based sector peer Washington Prime’s issues dipped.

The 6.45% senior notes due 2024 declined by ½ point to close at 58 bid.

PG&E better

In the utilities space, PG&E’s paper extended a positive run, market sources said.

The 6.05% notes due 2034 rose 1 point to close at 117¾ bid.

The San Francisco-based bankrupt electric utility’s paper saw a fifth straight trading day of gains on Wednesday after clearing a major hurdle for its restructuring last week.

California regulators voted to approve the company’s restructuring plan after negotiating on increased oversight and safety standards.

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

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