GEO notes drop following downgrade; GTT, AMC improve; Nine Energy gains; PBF declines

By Cristal Cody

Tupelo, Miss., May 25 – GEO Group Inc.’s bonds saw strong secondary trading action on Tuesday following S&P Global Ratings’ downgrade of the private prison operator.

The company “faces significant debt maturities in 2024 amid a backdrop of weaker operating conditions and unsupportive capital markets,” S&P said in the report. “We believe these factors will limit refinancing options and increases the likelihood the company will engage in a transaction we would view as distressed.”

GEO’s 5 1/8% senior notes due 2023 (B2/CCC) were down about 2 points from where the issue went out Monday at 89½ bid, a source said.

The bonds have softened from the 93 bid range at the start of May and the 90 area at the start of the year.

GEO’s 5 7/8% senior notes due 2024 (B2/CCC) also fell more than 2½ points to the 74 bid range by late afternoon on $3.5 million of paper traded.

The 2024 notes are off about 4 points from where the issue traded in early May and down from the 83¼ bid area at the year’s start.

The company’s 6% senior notes due 2025 (B2/CCC) dropped more than 3 points over the day to the 61¼ bid area on over $2 million of trading supply.

The bonds traded at the start of May in the 68 bid range and at the 80 bid area as the year opened.

S&P lowered the company’s issuer ratings to CCC+ from B, downgraded its bond ratings by two notches and levied a negative outlook.

The Boca Raton, Fla.-based real estate investment trust that specializes in secure and processing facilities and electronic monitoring is no longer managing several facilities where the contracts have expired and will no longer manage other facilities when those contracts expire.

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

GEO’s Justice Department detention facility contracts accounted for about 27% of its 2020 revenue, according to S&P when the agency first downgraded the company this year on March 24.

Moody’s Investors Service also lowered the company’s ratings on March 24.

S&P said on Tuesday that GEO has “borrowed substantially all of its remaining revolving credit facility availability and is building large cash balances, a strategy that has historically proven to be a strong indicator that a debt exchange is coming.”

The company reportedly has recently retained Lazard Financial Advisory and Skadden, Arps, Slate, Meagher & Flom LLP to assess various alternatives for its capital structure.

GTT bonds active

GTT Communications, Inc.’s 7 7/8% senior notes due 2024 (/C/) climbed 1 7/8 points to 6 7/8 bid on $9 million of trading supply during the session, a source said.

The Tysons, Va.-based distressed telecommunications and internet services provider’s bonds have softened year to date.

The notes traded at the 18 bid range in mid-April and the 40 bid area at the start of the year.

GTT reported May 17 in an 8-K filing with the Securities and Exchange Commission that it received an extension of the deadline under its term loan and revolving credit agreements and the forbearance agreement on the 7 7/8% notes to June 3.

GTT said that the company has been unable to file on a timely basis its filings, including its 2020 10-K and first-quarter 2021 10-Q and is unable to predict a specific filing date.

Fitch Ratings downgraded the McLean, Va.-based telecommunications and internet services provider 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.

AMC notes up

AMC Entertainment Holdings, Inc.’s bonds ticked up 1¾ to 2 points in heavy trading volume over the day, a source said.

AMC’s 5¾% senior subordinated notes due 2025 (Ca/C) rallied 2 points to 73 bid on $8 million of trading supply.

The company’s 12% second-lien senior secured notes due 2026 (Ca/C) improved 1¾ points to 94 bid on more than $10 million of secondary volume.

Earlier in May, AMC raised approximately $428 million in a registered offering of 43 million shares of class A common stock.

The Leawood, Kan.-based movie theater owner reported in January that it had raised or signed commitment letters to receive $917 million of new equity and debt capital. The company also issued $100 million of guaranteed first-lien secured notes due 2026 on Jan. 15.

Nine Energy improves

Overall market tone was mixed on Tuesday.

The iShares iBoxx High Yield Corporate Bond ETF edged up 1 cent to close at $87.22.

Oil prices were modestly better after climbing more than $2 on Monday.

West Texas intermediate crude oil benchmark futures for July deliveries settled 2 cents higher at $66.07 a barrel.

North Sea Brent crude oil futures for July deliveries improved 19 cents to settle at $68.65 a barrel.

In distressed energy issues, Houston-based oilfield services company Nine Energy Service, Inc.’s 8¾% notes due 2023 (Caa2/D) rose ½ point to 42 bid in strong trading activity, a source said.

Petroleum refiner PBF Holding Co. LLC’s 6% senior notes due 2028 (B3/B+/B+) fell Tuesday by more than 1 point to the 73¼ bid area on nearly $4.5 million of trading volume.

© 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.