Talen rebounds; PBF paper higher; energy up; secondary volume thin; Peabody quiet

By Cristal Cody

Tupelo, Miss., Aug. 23 – Talen Energy Supply LLC’s bonds were on the mend on Monday after sinking about 10 points in the prior week following a downgrade by S&P Global Ratings.

Talen’s 10½% senior notes due 2026 (B3/CCC/B-) rose 2 points in light secondary trading.

“It wasn’t super active, but the 10½s traded at just shy of 45,” a source said. “It felt like a little bit of short covering. There was some talk there might be new money needed in the name – that spooked people last week, but today, commodities were red hot.”

PBF Holding Co. LLC’s paper has “been under pressure for the last couple of weeks” but was seen as much as 3 points better on Monday in a handful of trades, a source said.

PBF’s 9¼% senior secured notes due 2025 (Ba3/BB/BB) headed out 1¾ points better on the day and back in the low 90s.

Energy bonds improved as equities gained and oil prices climbed more than $3 in the risk-on session, but trading was thin.

“There just weren’t many offers,” a source said.

Peabody Energy Corp.’s paper was quiet on Monday while the coal miner’s stock jumped 8.77%.

Offshore names also were quiet over the session.

Transocean Inc.’s 7½% notes due 2026 (Ca/CCC+) were last seen Friday in thin trading.

Market participants are looking toward heavier primary and secondary action in September and an early start to the Federal Reserve tapering bond purchases this year.

No major announcements are expected this week from the Federal Reserve Bank of Kansas City’s economic policy symposium, sources report. The event will be held Friday virtually due to Covid-19.

Talen improves

Talen’s paper showed signs of recovery in the secondary market on Monday after the bonds traded about 10 points lower last week following S&P’s downgrade, a source said.

Talen’s 6½% senior notes due 2025 (B3/CCC/B-) climbed past the high 30s during the session, going out up about 1½ points to 41¼ bid.

Talen’s 10½% senior notes due 2026 (B3/CCC/B-) improved about 1¾ points to 44¾ bid by the end of the day, a source said.

S&P downgraded The Woodlands, Tex., and Allentown, Pa.-based power company and its senior secured and unsecured bonds on Thursday.

PBF notes gain

PBF Holding’s 9¼% senior secured notes due 2025 (Ba3/BB/BB) jumped about 1¾ points to 91½ bid as the week kicked off, a source said.

The Parsippany, N.J.-based petroleum refiner’s notes ended Friday about ¾ point better on the week.

Peabody, Transocean quiet

Meanwhile, Peabody Energy’s paper quieted Monday. The company’s 6 3/8% senior secured notes due 2025 (Caa1/D) were last seen active on Friday about 2½ points softer at 74 bid, a source said.

The notes have declined about 5 points month to date.

S&P upgraded the St. Louis-based coal producer’s issuer ratings to CCC+ from SD on Friday.

Transocean’s 7½% notes due 2026 (Ca/CCC+) also were quiet during the session and were last seen Friday in thin trading at the 69 bid area.

The Vernier, Switzerland-based offshore driller’s paper declined about 5¾ points over the past week.

Distressed returns positive

The risk-on tone helped propel stocks and oil prices higher on Monday.

The iShares iBoxx High Yield Corporate Bond ETF closed up 27 cents, or 0.31%, to $87.56.

West Texas Intermediate crude oil benchmark futures for October deliveries jumped $3.50 to settle at $65.64 a barrel.

North Sea Brent crude oil futures for October deliveries also settled up $3.57 at $68.75 a barrel.

Distressed index returns were positive on Friday.

The S&P U.S. High Yield Corporate Distressed Bond index total return for Friday was 0.34%, while month-to-date total returns were minus 2.23%.

Distressed year-to-date total returns totaled 22.13% as the week closed.

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