Talen bonds slide; Moss Creek flat; Diamond Sports paper improves; China Evergrande declines

By Cristal Cody

Tupelo, Miss., Aug. 13 – Distressed energy bonds remained under pressure heading into the weekend as oil prices retreated on Friday.

Talen Energy Supply LLC’s bonds sank about 1½ points to 8 points after the company released its second-quarter earnings results following the market’s close on Thursday, a source said.

Moss Creek Resources Holdings Inc.’s 7½% senior notes due 2026 (Caa1/B) headed out on Friday unchanged but softer on the week.

The energy bond market this week “got hit by lower oil, and health, food and cable got hit by rates,” according to a BofA Securities, Inc. research note on Friday.

Meanwhile, default volume in the energy space has plunged to $3.2 billion year to date versus $20.3 billion last year with the energy sector default rate on pace to finish 2021 at 2%, Fitch Ratings said in a report on Thursday.

In other distressed issues, Diamond Sports Group LLC’s paper improved as the week closed after sliding on Monday following parent Sinclair Broadcast Group, Inc.’s announcement that DISH Network Corp. intends to drop its broadcast and tennis TV stations.

Secondary action has been lighter over the week on heavy issuance in the high-grade and junk bond markets and market participants out for late summer vacations, sources report.

In distressed emerging markets issues, China Evergrande Group’s dollar bonds traded down 1 5/8 points to 6 points on Friday after seeing a midweek bump following news the company is in discussions to sell assets.

Talen weakens

Talen’s 7¼% senior secured notes due 2027 (Ba3/BB-/BB-) fell about 1½ points to the 85½ bid area on Friday on heavy trading supply totaling over $32.5 million, a source said.

The notes sank below par in June after starting the year in the 106½ bid area.

Talen’s 6½% senior notes due 2025 (B3/CCC+/B-) dropped 8 points to trade at 51 by the close on more than $6.5 million of volume on Friday.

Talen’s 10½% notes due 2026 (B3/CCC+/B-) also sank 6½ points by the close to 55½ bid, the source said. Secondary volume totaled $9.75 million.

Moss Creek stable

Houston-based oil and gas exploration company Moss Creek Resources Holdings’ 7½% senior notes due 2026 (Caa1/B) headed out on Friday unchanged at 86½ bid, a source said.

The notes were down nearly 3½ points on $16 million of paper traded over the week, according to the BofA Securities research note.

The issue has softened about 8 points from a month ago.

Parent company Surge Energy US Holdings Co. announced on Thursday that Moss Creek has acquired leasehold interest and wells from Apache Corp. in Howard County, Tex., for $37.5 million in a transaction that closed on July 30.

Diamond Sports up

Diamond Sports Group’s 5 3/8% senior secured notes due 2026 (B2/CCC+) traded by the close ½ point better at the 61¼ bid area, a market source said.

The bonds are up about 1¼ points on the week and about 3 points better month to date.

Diamond Sports’ 6 5/8% senior notes due 2027 (Caa2/CCC-) rose ¾ point in thin secondary action on Friday to head out at 39¼ bid.

The bonds were ending the week about ¾ point softer but up about ¼ point since the start of the month.

Parent company Sinclair Broadcast said on Monday it is unlikely a carriage agreement with DISH will be reached before the company’s current agreement expires on Monday.

In June, Sinclair reported unsuccessful attempts to secure new funding for Diamond Sports, a Chesapeake, Va.-based sports broadcast group.

China Evergrande softens

Meanwhile, China Evergrande Group’s 8¼% senior notes due 2022 (Caa2/CCC-/CCC) dropped 2 5/8 points to 56½ bid on Friday on $11 million of volume, a source said.

The Chinese real estate developer’s bonds have plunged about 40 points since June.

China Evergrande’s 9½% senior notes due 2022 (Caa2/CCC-/CCC) slid 6 points by the close to 54 bid with over $6 million of paper traded.

The issue traded at the 94 bid area in June.

The Shenzhen, China-based company said in a stock exchange filing on Tuesday that it is in discussions to sell certain company assets, including interests in subsidiaries China Evergrande New Energy Vehicle Group Ltd. and Evergrande Property Services Group Ltd.

Distressed returns rise

Distressed index returns improved by late in the week.

The S&P U.S. High Yield Corporate Distressed Bond index total return on Thursday rose to 0.45% from 0.05% on Wednesday, 0.44% on Tuesday and minus 0.78% on Monday.

Distressed month-to-date total returns improved to minus 0.33% on Thursday from minus 0.77% on Wednesday, minus 0.82% on Tuesday and minus 1.26% at the start of the week.

Year-to-date total returns closed Thursday up at 23.49% versus 22.94% on Wednesday, 22.88% on Tuesday and 22.34% on Monday.

Overall market tone remained mostly better as oil prices declined on Friday.

The iShares iBoxx High Yield Corporate Bond ETF added 19 cents to close at $87.46 following an increase of 15 cents on Thursday and 14 cents on Wednesday after declines of 20 cents on Tuesday and 20 cents on Monday.

North Sea Brent crude oil futures for October deliveries fell 72 cents to settle the day at $70.59 a barrel.

West Texas intermediate crude oil benchmark futures for September deliveries dropped 65 cents to settle at $68.44 a barrel, while October deliveries settled Friday down 69 cents at $68.21 a barrel.

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