Diamond Sports, Peabody notes soften; AMC stronger; Transocean, Nabors up as oil soars

By Cristal Cody

Tupelo, Miss., Feb. 24 – Diamond Sports Group LLC’s bonds declined in the secondary market on Wednesday after parent company Sinclair Broadcast Group, Inc. reported 2021 earnings guidance for the sports segment.

Diamond Sports Group’s 6 5/8% senior notes due 2027 (B3/CCC-) fell 2 1/8 points to trade at 53.813 on trading volume of more than $31 million, a source said.

The notes were last seen on Thursday at 57½ bid.

The company’s 5 3/8% senior secured notes due 2026 (Ba3/CCC+) fell more than 1 point to head out in the 75½ bid range on secondary supply totaling nearly $28 million. The notes traded as low as 72¼ bid earlier in the session, the market source said.

Sinclair reported fourth-quarter results and gave 2021 revenue and earnings guidance for Diamond Sports Group on Wednesday.

S&P Global Ratings said in a release during the session that its CCC+ rating and negative outlook on the company “reflect our view that DSG's capital structure is unsustainable.”

On Jan. 27, S&P said it no longer expects Sinclair to provide financial support to the subsidiary and it delinked its issuer credit rating from the issuer credit rating on Sinclair.

“We expect DSG's S&P Global Ratings-adjusted EBITDA margins will decline to the low-20% area in 2021 and from the low-40% area in 2020,” S&P said on Wednesday. “We expect elevated, high-single-digit percent subscriber churn and rising sports programming fees will make it difficult for DSG to materially expand EBITDA margins and that discretionary cash flow will be less than $50 million annually, limiting the company's ability to significantly reduce leverage.”

S&P said it believes Diamond Sports Group “could pursue a subpar debt exchange or redemption, which we would view as tantamount to a default. Management commented on today's earnings call that it remains interested in liability management initiatives, which could include an exchange.”

AMC on rise

Meanwhile, distressed movie theater owner AMC Entertainment Holdings, Inc.’s 12% second-lien senior secured notes due 2026 (Ca/C) climbed nearly 4 points to 78½ bid on Wednesday, a source said.

Trading was heavy with more than $23 million of volume.

The 12% notes have added 10¼ points since Friday.

AMC’s bonds have climbed since Monday after the announcement that New York City will reopen theaters on March 5 at 25% capacity.

Oil bonds climb

Looking at the energy space, distressed bonds gained as oil prices soared on Wednesday.

North Sea Brent crude oil futures for April deliveries settled at $67.04 a barrel, up $1.67 on the day.

West Texas intermediate crude oil for April deliveries jumped $1.55 to settle at $63.22 a barrel.

Crude prices averaged just $39 a barrel last year, according to Fitch Ratings.

Offshore driller Transocean Inc.’s 7½% senior notes due 2026 (C/CCC-/) were quoted another 2¼ points higher on Wednesday at 65¾ bid, a market source said.

The notes have improved nearly 3 points week to date.

Transocean’s 11½% notes due 2027 (Caa3) also saw strong secondary supply totaling more than $11 million with the notes up 2 points at 82½ bid.

Oil and natural gas producer W&T Offshore, Inc.’s 9¾% senior secured second-lien notes due 2023 (Caa3/B) rose more than 1½ points during the session to 83 bid, a source said.

The company will release fourth-quarter and 2020 earnings results on March 3.

Oil and gas drilling contractor Nabors Industries Inc.’s 5¾% senior notes due 2025 (Caa2/CCC-) headed out more than 2½ points better at 77½ bid, according to the market source.

Parent company Nabors Industries Ltd.’s 7½% senior notes due 2028 (Caa1/CCC-) traded Wednesday at 86½ bid, up about 1½ points since Monday.

Elsewhere, coal producer Peabody Energy Corp.’s 6 3/8% senior secured notes due 2025 (Caa1/CCC-) fell 1¾ points to 50¼ bid over the day, a market source said.

The notes have dropped nearly 9 points since the start of February.

Peabody Energy completed a distressed exchange of its 6% secured notes due 2022 in January for new 10% secured notes due 2024 and 8½% secured notes due 2024.

Overall market tone was stronger with major stock indices higher on the day.

The iShares iBoxx High Yield Corporate Bond ETF closed up 9 cents, or 0.10%, to $87.53.

Intelsat Jackson stronger

In other distressed trading, Intelsat Jackson Holdings SA’s bonds saw additional gains on Wednesday, according to a market source.

The company’s 5½% senior notes due 2023 were quoted at 64¾ bid, up more than 4 points since Friday.

Bankrupt parent company Intelsat SA announced earlier in February that it reached a restructuring plan that will reduce the company’s debt to $7 billion from nearly $15 billion.

The company filed for Chapter 11 bankruptcy in May 2020 in the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division.

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