Distressed energy paper climbs as oil gains; PBF, Transocean, Talen, Peabody improve

By Cristal Cody

Tupelo, Miss., July 29 – Distressed energy issues improved in heavy secondary trading on Thursday as oil prices saw a bump of more than $1 a barrel.

PBF Holding Co. LLC’s bonds climbed about 1¾ points to 3½ points higher on Thursday with the company’s 7¼% senior notes due 2025 (B3/B+/B+) trading 12 points better week to date.

Transocean Inc.’s notes added about 1½ to 2 points over the day.

Talen Energy Supply LLC’s bonds also went out about 1¼ points to more than 2½ points better Thursday.

Peabody Energy Corp.’s 6 3/8% senior secured notes due 2025 (Caa1/D) traded about 5½ points stronger week to date.

In other distressed issues, Exela Technologies, Inc.’s notes dropped more than 2 points during the session.

The distressed space is narrowing with corporate defaults down significantly in 2021 so far, according to a Moody’s Investors Service report on Thursday.

“The wave of corporate issuer downgrades and negative outlooks in 2020 has given way to positive ratings momentum in 2021 as the pandemic’s effects ease,” Moody’s said. “In the first half of 2021, only 28 rated companies defaulted, roughly a quarter of the 114 defaults in the same period in 2020 and well below the 49 defaults in the first half of 2019.”

June saw two rated issuers default, according to the report.

Moody’s said its credit transition model now calls for the global speculative-grade default rate to fall below 2% by the end of the year. The global default rate was 5½% in June.

PBF gains ground

PBF’s bonds jumped more than 1¾ points to over 3½ points in strong trading activity on Thursday, a source said.

The company’s 6% senior notes due 2028 (B3/B+/B+) picked up more than 3½ points on over $6.6 million of secondary volume to head out at the 52½ bid area.

The issue has improved 3 points week to date after declining 6¾ points in the previous week.

PBF’s 7¼% senior notes due 2025 (B3/B+/B+) climbed over 3 points to trade at 60 bid on $4.5 million of trading action on Thursday.

The notes from the subsidiary of Parsippany, N.J.-based petroleum refiner PBF Energy Inc. have soared 12 points over the first four sessions after ending the prior week down 10 points.

PBF’s 9¼% senior secured notes due 2025 (Ba3/BB/BB) were among the heaviest traded distressed issues on Thursday, the source said.

The notes rose more than 1¾ points to the 93 bid area on over $19.5 million of trading volume.

Transocean rises

Transocean’s notes gained about 1½ points to 2 points over the day, according to a market source.

Transocean’s 8% debentures due 2027 (C/CCC) added 1½ points to hit 74 bid on $1 million of trading supply on Thursday.

The Vernier, Switzerland-based offshore driller’s 6.8% notes due 2038 (C/CCC-/) were up 2 points at 54½ bid on $1 million of secondary volume during the session.

Distressed returns positive

Oil prices settled more than $1 higher on Thursday.

North Sea Brent crude oil futures for September deliveries climbed $1.31 to settle the day at $76.05 a barrel.

West Texas Intermediate crude oil benchmark futures for September deliveries settled $1.23 higher at $73.62 day a barrel.

Overall market tone improved after the Federal Reserve left rates unchanged on Wednesday.

The S&P U.S. High Yield Corporate Distressed Bond index saw one-day total returns of 0.18%, up from minus 0.57% on Tuesday and minus 0.05% on Monday.

Month-to-date total returns improved to minus 3.66% on Wednesday from minus 3.83% on Tuesday and minus 3.28% on Monday.

Distressed year-to-date total returns were 23.19% on Wednesday, compared to 22.97% on Tuesday and 23.67% on Monday.

The iShares iBoxx High Yield Corporate Bond ETF closed Thursday up 19 cents at $87.96.

Talen rebounds

In other distressed energy issues traded Thursday, Talen Energy’s bonds improved, a source reported.

Talen’s 6½% senior notes due 2025 (B3/CCC+/B-), down 2¼ points on Wednesday, were quoted up more than 2½ points at the 59 bid area in thin secondary action.

The Woodlands, Tex., and Allentown, Pa.-based power company’s 10½% senior notes due 2026 (B3/CCC+/B-) were more active with $7.5 million of paper traded Thursday, the source said.

Talen’s notes traded more than 1¼ points higher at 64 bid.

The issue remains down from where it traded at 91 bid at the end of May.

Talen’s outlooks were revised to negative from stable by Moody’s Investors Service in June and Fitch Ratings earlier in July.

Peabody heads higher

Also Thursday, Peabody Energy’s 6 3/8% senior secured notes due 2025 (Caa1/D) gained 2½ points to 79 bid by the close in heavy secondary supply, a source said.

The notes were about 5½ points better week to date.

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

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

Peabody’s tender offer expires Aug. 6.

Exela bonds drop

Elsewhere, Exela Technologies’ bonds softened during the session, a source said.

Debt issuer Exela Intermediate LLC’s 10% senior secured first-lien notes due 2023 (Caa3/CCC-) fell 2 1/8 points to 70½ bid on over $5.8 million of trading volume.

The notes have declined about 4 points week to date.

The issue ended June in the 43½ bid area and opened the year at 31 bid.

Exela, an Irving, Tex.-based software and services company, announced on June 30 that it completed a $100 million at-the-market equity program and entered into an additional $150 million at-the-market equity program.

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