Intelsat notes eyed as market weighs FCC deal; L Brands better amid asset sale talk

By James McCandless

San Antonio, Feb. 10 – The distressed debt space opened Monday with much of the focus on telecom and retail newsmakers.

Intelsat SA’s notes varied in direction as the market scrutinizes the company’s C-band spectrum auction deal with the Federal Communications Commission.

Sector peer Frontier Communications Corp.’s issues also diverged.

In the retail space, L Brands, Inc.’s paper performed better amid talk of a potential sale of its Victoria’s Secret segment.

Drug store chain Rite Aid Corp.’s notes tracked higher.

Meanwhile, in oil and gas, Southwestern Energy Co.’s issues dropped after receiving a negative outlook from Fitch Ratings.

Contract driller Diamond Offshore Drilling, Inc.’s paper saw negativity after posting a lukewarm Q4 earnings report.

As oil futures were slashed, Whiting Petroleum Corp.’s and EQT Corp.’s notes ended the session weaker.

Retail-related REIT Uniti Group Inc.’s paper was mixed as the company works on a refinancing deal with its creditors.

Intelsat, Frontier active

Intelsat’s notes varied in direction at the top of the week, traders said.

Intelsat Jackson Holdings SA’s 8½% senior notes due 2024 held level at 92½ bid. The 9¾% senior notes due 2025 shaved off ¼ point to close at 94¼ bid.

By the close, about $45 million of the notes changed hands.

The Luxembourg-based satellite operator’s structure was in high demand as market analysts took a negative view on its C-band spectrum auction revenue agreement with the FCC.

Analysts estimated that the company would reap just under $5 billion in revenue from the auction, which would only provide a dent to its $14 billion debt load.

“I think it’s enough to stave off bankruptcy, but they will be limping,” a trader said.

Last week, after warning that an insufficient revenue deal would drive it into bankruptcy, regulators agreed to pay out a collective $14.9 billion to operators.

Norwalk, Conn.-based wireline communications name Frontier’s issues also diverged.

The 10½% senior notes due 2022 fell ¼ point to close at 47¼ bid. The 11% senior notes due 2025 picked up ¼ point to close at 47¾ bid.

L Brands, Rite Aid better

In the retail space, L Brands’ paper performed better by the end of the day, market sources said.

The 6¾% senior notes due 2036 rose 1¼ points to close at 101¾ bid. The 5¼% senior notes due 2028 inched up ¼ point to close at 100¾ bid.

According to reports on Sunday, the Columbus, Ohio-based retail name is approaching a deal to sell its Victoria’s Secret segment to private equity firm Sycamore Partners.

Analysts project that a sale of the lingerie brand could net as much as $3.4 billion.

The company has been exploring a sale since November, under pressure from activist investors after successive declines in comparable store sales every quarter.

“At this point, it feels like an inevitability,” a trader said. “If they keep it, they stay trapped in a box that a lot of names in the space are in. With a sale, there’s a chance to adapt.”

Camp Hill, Pa.-based drug store chain Rite Aid’s notes tracked higher.

The 6 1/8% senior notes due 2023 gained ½ point to close at 92¼ bid.

Southwestern Energy drops

Meanwhile, in oil and gas, Southwestern Energy’s issues dropped, traders said.

The 7½% senior notes due 2026 declined by 3¾ points to close at 81 bid. The 6.2% senior notes due 2025 were pushed down 2½ points to close at 82¼ bid.

About $26 million was on the tape at the end of the afternoon.

On Monday, Fitch Ratings lowered the Spring, Tex.-based independent oil and gas producer’s outlook to negative from stable.

The agency cited weak commodity prices in relation to the company’s leverage profile, promising to revisit the outlook in 12 to 18 months as it watches for management’s ability to maintain forecasted leverage.

Fitch affirmed the name’s long-term issuer default rating, senior secured revolving credit facility rating and senior unsecured notes rating.

Diamond Offshore down

Sector peer Diamond Offshore’s paper saw negativity, market sources said.

The 7 7/8% senior notes due 2025 declined by 1¾ points to close at 80¾ bid. The 4 7/8% senior notes due 2043 slipped 1 point to close at 49½ bid.

Early Monday, the Houston-based contract driller released its fourth-quarter earnings report, showing lukewarm results.

The company reported a loss of 45 cents per share, narrower than the 66 cents per share loss that was expected by analysts.

Revenue topped predictions at $276.37 million.

In the fourth quarter, the company secured a $50 million contract extension, bringing its 2019 backlog to $620 million.

Oil declines

Crude oil futures were pushed lower, followed by distressed energy names, traders said.

Declines in futures were spurred by weak Chinese demand and the expectation of output cuts from OPEC.

West Texas Intermediate crude oil futures for March delivery lost 75 cents to finish the day at $49.57 per barrel.

North Sea Brent crude oil futures for April delivery ended the session at $53.27 per barrel after a $1.20 fall.

Denver-based producer Whiting Petroleum’s notes were weaker.

The 6¼% senior notes due 2023 dived 4¼ points to close at 69 bid. The 6 5/8% senior notes due 2026 fell 3¼ points to close at 54½ bid.

Pittsburgh-based peer EQT’s issues were also under pressure.

The 6 1/8% senior notes due 2025 lopped off 2¾ points to close at 85¾ bid.

Uniti mixed

Retail-related property company Uniti’s paper saw mixed activity, market sources said.

The 7 1/8% senior paper due 2024 closed level at 85¼ bid. The 8¼% senior paper due 2023 garnered ½ point to close at 87½ bid.

The Little Rock, Ark.-based real estate investment trust saw heightened trading in anticipation of a refinancing deal, which was completed late Monday.

After the close, the company announced an amendment and waiver with the lenders under its senior secured credit facilities in connection with the closing of its offering of $2.25 billion of 7 7/8% senior secured notes due 2025, Prospect News reported.

The amendment and waiver waives any potential default if the name includes a “going concern” statement in any 2019 financial statement.

© 2015 Prospect News.
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