McDermott eyed after bankruptcy filing; L Brands notes lower despite analyst upgrade

By James McCandless

San Antonio, Jan. 21 – A truncated holiday week in the distressed debt space began with shifts in the energy and retail sectors.

McDermott International, Inc.’s notes moved higher despite its Chapter 11 bankruptcy filing on Tuesday morning.

Slight losses for oil futures were met with dips for Antero Resources Corp.’s, Whiting Petroleum Corp.’s and Chesapeake Energy Corp.’s issues.

Meanwhile, retailer L Brands, Inc.’s paper declined despite an analyst upgrade based on potential asset sales.

Sector peer Rite Aid Corp.’s notes were under pressure after announcing the early results of an exchange offer.

In the pharma space, Mallinckrodt plc’s issues improved while Endo International plc’s paper saw mixed activity.

Utilities name PG&E Corp.’s paper was active but unchanged as the company seeks to resolve a dispute with its creditors.

McDermott higher

McDermott’s notes spent the session moving higher, traders said.

The 10 5/8% senior notes due 2024 rose 3¾ points to close at 12¾ bid.

On Tuesday morning, the Houston-based oil and gas engineering company announced that it has the support of more than two-thirds of all its funded debt creditors for a restructuring transaction that will equitize nearly all its funded debt, Prospect News reported.

The agreement would eliminate over $4.6 billion of debt.

McDermott expects to fund its bankruptcy process with $2.81 billion in debtor-in-possession financing.

“It had a swift fall from grace,” a trader said. “It shows what can happen if you make an acquisition at the wrong point in the cycle.”

In 2018, the company took on a massive amount of debt in its $3.5 billion takeover of Chicago Bridge & Iron Co.

Concurrently, McDermott said that it has reached an agreement to sell its Lummus Technology segment to the Chatterjee Group and Rhone Group for at least $2,725,000,000.

Oil futures dip

Slight losses for oil futures were met by similar losses in distressed energy tranches, market sources said.

West Texas Intermediate crude oil futures for February delivery shaved off 20 cents to finish at $58.34 per barrel.

North Sea Brent crude oil futures for March delivery settled at $64.59 per barrel after a 26 cent loss.

Denver-based independent oil and gas producer Antero Resources’ issues dipped.

The 5 1/8% senior notes due 2022 declined by ¾ point to close at 87 bid. The 5 5/8% senior notes due 2023 slid 3 points to close at 73¼ bid.

Whiting Petroleum, another Denver-based producer, saw its paper follow the sector trend.

The 6¼% senior notes due 2023 dipped ¾ point to close at 82¼ bid. The 6 5/8% senior paper due 2026 fell ½ point to close at 64½ bid.

Oklahoma City-based peer Chesapeake Energy’s notes were similarly under water.

The 11½% notes due 2025 lopped off 2¾ points to close at 85 bid. The 8% senior notes due 2025 dived 5 points to close at 57¼ bid.

L Brands down

Meanwhile, retailer L Brands’ issues declined as the day ended, traders said.

The 5¼% senior notes due 2028 moved down 2 points to close at 96 bid. The 6¾% senior notes due 2036 lost 1¼ points to close at 93½ bid.

News broke on Tuesday that the Columbus, Ohio-based retailer had received an analyst upgrade from KeyBanc Capital Markets.

In a note, analysts said that its upgrade to overweight was based on the increased potential for a value-creating transaction, specifically the potential sale of struggling segment Victoria’s Secret.

Its quarter-by-quarter comparative sales have consistently fallen over the last year.

The analysts said that a spinoff of its Bath & Body Works arm would also be positive.

“Getting rid of Victoria’s Secret has been talked about for a while,” a trader said. “But who would buy it and how would you revamp it to appeal to people today?”

Rite Aid loses

Sector peer Rite Aid’s paper was similarly under pressure, market sources said.

The 6 1/8% senior paper due 2023 declined by 2¼ points to close at 88¾ bid.

The Camp Hill, Pa.-based drug store chain announced early results for its exchange offer of up to $600 million of its outstanding $1,753,490,000 of the 2023 notes for newly issued 7½% senior secured notes due 2025.

As of the Jan. 17 early deadline, $1,633,938,000 of the existing notes, representing about 93.18% of the outstanding amount, were tendered for exchange.

The company began the exchange offer in order to extend a maturity wall by two years.

Mallinckrodt up

In the pharmaceuticals space, Mallinckrodt’s notes improved, traders said.

The 5¾% senior notes due 2022 were lifted 6½ points to close at 57 bid. The 4 7/8% senior notes due 2020 garnered ½ point to close at 83½ bid.

The Dublin-based drugmaker’s structure has experienced a wave of positive market sentiment over the last week after showcasing its 2019 debt reduction efforts at a conference last Monday.

The company said that it achieved $1 billion in debt cuts, promising more of the same in the new year and indicating its awareness of an April maturity wall of $600 million.

Endo, another Dublin-based generics producer, saw its issues take mixed movements.

The 6% senior notes due 2025 improved by ¾ point to close at 74½ bid. The 6¾ senior notes due 2023 held level at 80½ bid.

PG&E active, flat

Meanwhile, PG&E’s paper was active but ultimately unchanged, market sources said.

The 6.05% bonds due 2034 remained at 114¼ bid.

As the San Francisco-based bankrupt electric utility’s paper remains active, the company is in the midst of negotiations with creditors over how to proceeds with its restructuring process.

Reportedly, if a creditor group led by Pimco and Elliott Management agrees to shelve its rival restructuring plan, the company would give it equity and new debt.

© 2015 Prospect News.
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