China Evergrande flat; Fantasia quiet; Transocean, Peabody bonds rally; AMC notes up

By Cristal Cody

Tupelo, Miss., Oct. 4 – China Evergrande Group’s dollar notes remained steady on Monday as default fears spread following a missed debt payment by Fantasia Holdings Group Co. Ltd.

Evergrande’s 8¾% senior notes due 2025 (C/C/C) were unchanged on over $12 million of secondary volume on Monday.

“It is flat basically from Friday,” a source said, noting some traders are “swapping from one to the other” in Evergrande’s offshore bonds.

Concern about Evergrande’s missed coupon payments in September spread to Fantasia on Monday after the China-based property developer missed a $205.7 million debt payment, sources said.

S&P Global Ratings downgraded Fantasia on Wednesday, expressing doubt over the issuer’s ability to pay $760 million of senior notes that were due Monday and coming up on Dec. 18.

Fantasia’s 10 7/8% senior notes due 2023 (B/CCC) were last seen in the prior week down about 8½ points on the week at the 32 3/8 bid area.

Meanwhile, distressed energy bonds sparkled as oil prices gained nearly $2 after OPEC and participating non-OPEC oil producing countries reconfirmed the production of 400,000 more barrels a day for November.

Brent crude futures for November deliveries climbed $1.98 to settle at $81.26 a barrel.

“The WTI is up, the Brent is up, so energy is in a good spot,” a market source said.

Transocean Inc.’s bonds traded about 1 point to more than 3½ points stronger.

Peabody Energy Corp.’s 8½% senior secured notes due 2024 (Caa1/CCC-) also rallied over 1 point on Monday after the bonds hit 90 bid on Friday.

AMC Entertainment Holdings, Inc.’s subordinated notes improved over the day by 1¾ points.

In other distressed issues on Monday, Diamond Sports Group LLC’s paper traded 1½ points to 3¾ points weaker.

Mallinckrodt LLC’s paper also was softer with the 5 5/8% notes due 2023 down over 1½ points.

Evergrande stable

China Evergrande’s 8¾% senior notes due 2025 (C/C/C) headed out unchanged at 24 bid on over $12 million of secondary volume on Monday, a source said.

The notes were flat to ½ point better on Friday and down about 2 points on the week.

The Shenzhen, China-based real estate developer has entered into a 30-day grace period following missed bond payments, according to market sources.

Transocean, Peabody up

Offshore driller Transocean’s bonds traded about 1 point to more than 3½ points stronger during the session on the back of oil gains, a source said.

Transocean’s 9.35% notes due 2041 (C/CCC-/) were among the most active issues on $5 million of supply. The notes climbed over 3½ points to 69 1/8 bid.

The Vernier, Switzerland-based company’s 6.8% senior notes due 2038 (C/CCC) added over 3¼ points to hit the 63 bid range on light activity of $1.18 million.

St. Louis-based coal producer Peabody Energy’s 8½% senior secured notes due 2024 (Caa1/CCC-), up 3 points on Friday, added more than 1 point to trade by Monday’s close at 91¼ bid.

Secondary supply totaled $6.25 million.

AMC improves

Looking at the theater space, AMC Entertainment’s 5¾% senior subordinated notes due 2025 (Ca/C) picked up 1¾ points Monday to trade at 81¼ bid, a source said.

The Leawood, Kan.-based movie theater chain’s issue saw $5.25 million of secondary volume.

Diamond Sports drops

Elsewhere, Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa1/CCC) declined 1½ points to end the day at 60½ bid, a market source said.

The issue saw $12 million of paper traded over the day.

Diamond Sports’ 6 5/8% senior unsecured notes due 2027 (Ca/CC) sank 3¾ points to 39¼ bid on $3 million of paper traded on Monday.

In June, parent Sinclair Broadcast Group Inc. reported unsuccessful attempts to secure new funding for the Chesapeake, Va.-based sports broadcast group.

Sinclair announced last month that DISH Network Corp. dropped its broadcast and tennis TV stations.

The company will report third-quarter earnings results on Nov. 3.

Mallinckrodt lower

Mallinckrodt’s 5 5/8% notes due 2023 dropped over 1½ points to 50¼ bid in light trading action on Monday, a source said.

The notes saw $1 million of secondary volume during the session.

Mallinckrodt’s Chapter 11 bankruptcy reorganization is winding through the U.S. Bankruptcy Court for the District of Delaware.

An opioid-related lawsuit against Mallinckrodt by New York also is moving through the bankruptcy court.

The pharmaceuticals company, based in Dublin and St. Louis, filed for Chapter 11 on Oct. 12, 2020.

Distressed index soft

Distressed index returns were weak as October kicked off.

The S&P U.S. High Yield Corporate Distressed Bond index’s month-to-date total returns were minus 0.69% on Friday.

Year-to-date total returns declined to 29.32% on Friday from 30.23% in the prior session.

Overall market tone opened the week softer with equities lower.

The iShares iBoxx High Yield Corporate Bond ETF fell 31 cents to close $87.10.

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