GEO notes climb; Consol softens; Peabody better; telecom bonds mixed; Mallinckrodt higher

By Cristal Cody

Tupelo, Miss., April 7 – GEO Group Inc.’s bonds saw heavy trading over Wednesday’s session after the company reported it suspended quarterly dividends.

The company’s 5 1/8% senior notes due 2023 (B2/B-) rose more than 3 points to trade better than 91½ bid on more than $19 million of secondary volume, a source said.

GEO’s 6% senior notes due 2026 (B2/B-) climbed 3¼ points on $17 million of secondary volume to 73½ bid.

The Boca Raton, Fla.-based real estate investment trust that specializes in secure facilities, processing facilities and electronic monitoring said in a news release on Wednesday that its board of directors has immediately suspended GEO’s quarterly dividend payments in order to maximize cash flows to repay debt, deleverage and internally fund growth.

GEO said it has canceled approximately $35 million in capital expenditures previously planned for 2021 and has set a goal of repaying a minimum of $125 million to $150 million in net debt this year.

As of March 31, GEO said it had $291 million in cash on hand and approximately $209 million in borrowing capacity available under a revolving credit facility, in addition to an accordion feature of $450 million under its senior credit facility.

Moody’s Investors Service and S&P Global Ratings downgraded the company on March 24 on potential risk of material revenue and earnings loss.

In January, President Biden instructed the U.S. Department of Justice to not renew contracts with privately operated prison operators.

GEO Group’s federal contract for the company’s Moshannon Valley Correctional Facility in Pennsylvania expired on March 31.

The contact generated about $42 million in annual revenue for GEO, which said it planned to market the facility to other federal and state agencies.

GEO’s Justice Department detention facility contracts accounted for about 27% of its 2020 revenue, according to S&P.

GEO said in the release on Wednesday that it currently intends to maintain its corporate tax structure as a real estate investment trust, but the board will undertake an evaluation of the REIT structure.

The board expects to conclude the evaluation in the fourth quarter.

If the board maintains GEO’s REIT status, an additional dividend payment may be required before the end of the year in order to meet the minimum REIT distribution requirements, according to the news release.

CoreCivic dips

Elsewhere in the sector, bonds from CoreCivic, Inc., formerly known as Corrections Corp. of America, were modestly softer on the day on the company’s new issue, a source said.

CoreCivic’s 4¾% notes due 2027 (Ba2/BB-) traded about ¼ point weaker at 85½ bid on Wednesday.

The company sold $450 million of 8¼% five-year notes during the Wednesday session.

Moody’s and S&P also downgraded CoreCivic’s ratings on March 24.

Energy bonds mixed

Bond market tone was mixed Wednesday on the release of the minutes from the Federal Reserve’s March policy meeting.

The iShares iBoxx High Yield Corporate Bond ETF closed off 3 cents at $87.23.

Oil prices remained better a second day.

North Sea Brent crude oil futures for June deliveries rose 42 cents to settle at $63.16 a barrel.

West Texas Intermediate crude oil futures for May deliveries settled 44 cents higher at $59.77 a barrel, while June deliveries also settled up 44 cents to $59.81 a barrel.

Distressed energy bonds were mixed.

Canonsburg, Pa.-based coal producer Consol Energy Inc.’s 11% second lien notes due 2025 (Caa1/CCC) declined 1 point to 93 bid on $3 million of paper traded, a source said. The notes are yielding more than 13%.

The company announced on March 31 that it priced $75 million of revenue bonds.

St. Louis-based coal producer Peabody Energy Corp.’s 6 3/8% senior secured notes due 2025 (Caa1/CCC-) traded about ¼ point better at 41 5/8 bid, a market source said.

Frontier mixed, GTT better

Looking at the distressed telecom sector, secondary action was light, a source said.

Bankrupt Frontier Communications Corp.’s 11% notes due 2025 were mostly unchanged at 69 bid.

The issue was quoted at 68¾ bid in the same session a week ago.

Frontier plans to emerge from Chapter 11 bankruptcy early in 2021 after filing on April 14, 2020.

The U.S. Bankruptcy Court for the Southern District of New York confirmed the company’s plan of reorganization in August.

The company announced in January that it received approval from the Federal Communications Commission for its restructuring.

GTT Communications, Inc.’s 7 7/8% senior notes due 2024 (C) were not active over the day but were last seen ending March better at 17 bid, a source said.

The bonds traded at the start of March in the 5 bid area and opened the year in the 40 bid range.

GTT announced on Dec. 22 that certain existing lenders and noteholders had committed to provide the company with a $275 million delayed-draw term loan facility.

In an 8-K filing with the Securities and Exchange Commission on March 30, the company said lenders have agreed to extend a deadline to deliver its audited consolidated financial statements under the credit agreement for the 2020 fiscal year until April 15.

Fitch Ratings downgraded the Tyson, Va.-based telecommunications and internet services company on March 8, noting the company is likely to undertake a restructuring or a distressed debt exchange in the next year.

S&P dropped the ratings in February, while Moody’s withdrew the ratings on the company in December.

Mallinckrodt gains

Looking at other bankrupt issues trading on Wednesday, pharmaceuticals maker Mallinckrodt plc’s bonds were stronger on thin supply, a market source said.

Mallinckrodt’s 5¾% notes due 2022 jumped 2½ points to 70¾ bid.

The company announced in March that it reached an agreement with a group of first-lien term lenders holding about $1.3 billion of its outstanding first lien term loans to support its restructuring support agreement.

Mallinckrodt (D) filed for Chapter 11 bankruptcy in October in the U.S. Bankruptcy Court for the District of Delaware.

The company has received approval to extend filing a bankruptcy restructuring plan until Aug. 9.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.