GEO Group notes soften; AMC stable; Transocean higher; Endo stronger week to date

By Cristal Cody

Tupelo, Miss., April 29 – GEO Group Inc.’s distressed paper traded lower on Thursday as the prison operator prepares to post first-quarter earnings results.

GEO Group’s 5 7/8% senior notes due 2024 (B2/B-) fell 1 point to 80½ bid on $4 million of paper traded Thursday, a source said.

The notes have softened slightly from the 86 bid area in early January.

GEO announced on April 7 that its board of directors suspended its quarterly dividend payments in order to maximize cash flows to repay debt, deleverage and internally fund growth.

The Boca Raton, Fla.-based real estate investment trust that specializes in secure and processing facilities and electronic monitoring said it has a goal of repaying at least $125 million to $150 million in net debt this year.

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 Joe 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, which generated about $42 million in annual revenue, expired on March 31.

Also, the company announced that its contract with the U.S. Marshals Service for a facility in Queens, N.Y., which generated $19 million in annual revenue, expired on March 31. GEO reported it has requested an extension to provide a proper transition.

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

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.

GEO said earlier in April that it intends to maintain its corporate tax structure as a real estate investment trust, but the company’s board will study the REIT structure with the evaluation expected to conclude in the fourth quarter.

The company plans to release its first-quarter earnings results on May 10.

AMC unchanged

AMC Entertainment Holdings, Inc.’s 12% second-lien senior secured notes due 2026 (Ca/C) traded Thursday afternoon flat at 85¾ bid after softening in the prior session in heavy volume, a source said.

The notes had declined 1¼ points on more than $30.5 million of paper traded Wednesday.

On Tuesday, AMC registered with the Securities and Exchange Commission to issue up to 43 million shares of its class A common stock, downsizing from initial plans to issue 500 million more new shares.

AMC also on Tuesday reported preliminary first-quarter results that include expected total revenue of $148.3 million versus $941.5 million in the year-ago period and a net loss between $572.2 million and $567.2 million for the quarter ended March 31.

The Leawood, Kan.-based movie theater owner reported in March that 98% of its U.S. locations have reopened.

Transocean rallies

Offshore driller Transocean Inc.’s bonds were stronger across the board in the distressed energy space, sources reported Thursday.

Transocean’s 11½% senior guaranteed notes due 2027 (Caa3/CCC) added another ¾ point to head out at 96¾ bid in light volume. The notes improved 1¼ points in the prior session on $8.5 million of secondary volume.

Transocean’s 8% notes due 2027 (Ca/CCC) rose 2 1/8 points to 71½ bid on $15.5 million of paper traded Thursday.

The company’s 7¼ notes due 2025 (Ca/CCC) also traded 2½ points higher to 75½ bid on $7 million of secondary supply during the session.

Oil prices were higher for a third consecutive session.

North Sea Brent crude oil futures for June deliveries rose $1.29 to settle at $68.56 a barrel.

West Texas intermediate crude oil benchmark futures for deliveries settled up $1.15 at $65.01 a barrel.

Overall market tone was stronger following president Biden’s proposals to Congress on Wednesday night and after the Federal Reserve left the benchmark interest rate unchanged in the prior session.

The iShares iBoxx High Yield Corporate Bond ETF closed up 10 cents to $87.48.

Endo in focus

In other distressed secondary trading, Endo Finance LLC’s 6% senior notes due 2028 (Caa2/CCC+) headed out flat at 76½ bid on Thursday, a market source said.

The notes are 5¾ points better week to date and nearing where the issue traded at the start of the year at 84 bid.

Parent Dublin-based pharmaceuticals maker Endo International plc will report its first-quarter earnings results on May 6.

Mallinckrodt trades slow

Meanwhile, bankrupt pharmaceuticals maker Mallinckrodt plc’s bonds were not seen in secondary trading over the session, a market source said.

The company’s 5 5/8% notes due 2023 were last seen in strong trading on Tuesday at 68 bid, down 2 points from the same day a week ago.

Mallinckrodt filed its Chapter 11 plan of reorganization and disclosure statement in the U.S. Bankruptcy Court for the District of Delaware on April 20.

A hearing on the plan is scheduled for May 26.

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, which has principal offices in Dublin and St. Louis, filed for Chapter 11 bankruptcy on Oct. 12, 2020.

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