Offshore bonds up; Transocean higher; Talen mixed; Peabody better; Endo, AMC improve

By Cristal Cody

Tupelo, Miss., July 21 – Energy bonds saw mixed trading action in the distressed secondary market on Wednesday as oil prices improved after Monday’s plunge.

“The whole space has been under pressure – today, not so much,” a source said. “Oil’s up $3, so everything has whipsawed from two days ago. Oil is still off its highs but it’s back up to $70 now from the mid-$60s.”

Bonds from “offshore names” were up about 1 point Wednesday in the distressed space, a market source said.

Transocean Inc.’s 7½% notes due 2026 (Ca/CCC+) rose 1 7/8 points to head out at 79½ bid.

The notes sank 6 points on Monday and dropped 1 7/8 points on Tuesday.

The Vernier, Switzerland-based offshore driller’s 8% notes due 2027 (Ca/CCC-) improved about ¾ point to 74½ bid over the day.

The notes dove 9 points on Monday and traded 3¼ points higher on Tuesday.

West Texas Intermediate crude oil benchmark futures for September deliveries added $3.10 to settle Wednesday at $70.30 a barrel after dropping $5.21 on Monday and improving 85 cents on Tuesday.

North Sea Brent crude oil futures for September deliveries settled $2.88 higher at $72.23 a barrel. Brent crude prices dropped $4.97 on Monday and added 73 cents on Tuesday.

Distressed returns positive

Market tone continued to improve following Monday’s broad sell-off.

The iShares iBoxx High Yield Corporate Bond ETF closed Wednesday up 21 cents at $87.73. The ETF fell 59 cents on Monday and recovered 44 cents on Tuesday.

The S&P U.S. High Yield Corporate Distressed Bond index finished Tuesday up 0.82% after posting at minus 1.77% on Monday.

Month-to-date total returns were minus 3.37% on Tuesday, improved from minus 4.15% on Monday. Year-to-date total returns were 23.56% in the prior session, compared to 22.56% on Monday and 24.76% on Friday.

Talen mixed

Talen Energy Supply LLC’s paper was mixed but remains weak overall following the downgrade Wednesday by Fitch Ratings, according to market sources.

“It’s sinking to the 60s,” one source said.

Talen’s 10½% senior notes due 2026 (B3/CCC+/B-) fell about ¼ point to 64¼ bid by the end of the session.

The notes are down 2½ points from Friday.

The bonds have dropped from 91 bid at the end of May and the 89 bid area in early January.

Talen’s 7¼% senior secured notes due 2027 (Ba3/BB-/BB-) jumped 1½ points to 88 bid during the session.

The notes, which fell below par in June, started the year in the 106½ bid area.

Talen’s 6½% senior notes due 2025 (B3/CCC+/B-) were the most active during the session and traded down about 2 points to 3 points at 56 bid.

“They were at 90, 88 in May, so they’re down a considerable amount in about a month-plus,” a source said.

On Wednesday, Fitch cut the issuer ratings on The Woodlands, Tex., and Allentown, Pa.-based power company, downgraded its bonds and revised Talen’s outlook to negative from stable.

Moody’s Investors Service dropped Talen’s outlook to negative from stable on June 16.

Peabody higher

In other distressed energy issues, coal miner Peabody Energy Corp.’s 6 3/8% senior secured notes due 2025 (Caa1/D) rose more than 1 point on the day to 74½ bid, a source said.

The notes are down more than 2½ points week to date.

S&P Global Ratings downgraded the company to SD from CCC on July 12 based on Peabody’s distressed debt repurchases and tender offer the agency said it views as tantamount to default.

The St. Louis-based coal producer announced on July 7 a tender offer to purchase up to $13.28 million of its 8½% notes due 2024 at a price equal to 73.84.

Endo bonds gain

Bonds from distressed pharmaceutical makers traded unchanged to higher on the day after the announcement of up to a $26 billion settlement with Johnson & Johnson and distributors AmerisourceBergen Drug Corp., Cardinal Health Inc. and McKesson Corp. over the opioid epidemic.

Endo Finance LLC’s paper saw further gains after soaring on Tuesday, a source said.

Endo’s 6% senior notes due 2028 (Caa2/CCC+) picked up 2 points to trade at 67¾ bid by the end of the day.

The notes traded nearly 5¾ points better on Tuesday.

Endo’s 9½% senior secured notes due 2027 (Caa2/CCC+) hit par by the close on Wednesday after trading up 1 point to 97¼ bid in the previous session.

The company’s paper ended the prior week mixed after parent Dublin-based pharmaceuticals maker Endo International plc reported on Friday several orders by the Tennessee Supreme Court and state court of appeals regarding a default judgment related to opioids.

Pennsylvania attorney general Josh Shapiro announced the national settlement on Wednesday. The agreement would resolve the claims of states and local governments, including nearly 4,000 that have filed lawsuits in federal and state courts, according to the news release. States have 30 days to sign onto the deal.

On Tuesday, New York attorney general Letitia James announced the state reached a $1.1 billion agreement with the distributors.

A trial related to opioids against Endo Health Solutions, Teva Pharmaceuticals USA and Allergan Finance is underway in New York state court.

AMC notes better

Also Wednesday, AMC Entertainment Holdings, Inc.’s bonds traded higher, while the stock dropped 5.36% on the day, according to market sources.

“It’s fairly active again today,” one source said. “It’s mostly just fast money like hedge funds.”

AMC’s 12% second-lien senior secured notes due 2026 (Ca/C) were quoted trading up about ¾ point on the day at 91, 91½.

The 12% notes sank 4½ points on Monday and recovered 3½ points during Tuesday’s session.

The Leawood, Kan.-based movie theater owner’s notes declined more than 7 points in the prior week.

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