PBF soars; Diamond Sports gains on funding update; Greenland, Kaisa, Sunac notes slide

By Cristal Cody

Tupelo, Miss., Oct. 8 – Distressed energy bonds climbed in strong trading on Friday ahead of the holiday weekend as oil and gas prices continued to rally.

Petroleum refiner PBF Holding Co. LLC’s notes jumped between 9½ points and 11 points.

“Energy and natural gas companies saw the best performance,” a source said.

West Texas Intermediate crude oil benchmark futures for November deliveries rose $1.05 to settle the day at $79.35 a barrel.

Overall market tone stayed soft on Friday following the Labor Department’s disappointing September jobs report.

September’s nonfarm payroll employment rose by 194,000, much lower than the 500,000 increase analysts expected.

The unemployment rate for the month fell by 0.4 percentage point to 4.8%, better than the 5.1% rate forecast.

Stocks were down and Treasury yields climbed another 2 basis points to 3 bps on the long end. The benchmark 10-year note yield added 3 bps to hit 1.605% after rising 4 bps on Thursday.

The iShares iBoxx High Yield Corporate Bond ETF declined 26 cents to finish at $86.76.

Diamond Sports Group LLC’s notes were among the most heavily traded distressed junk issues on Friday following parent Sinclair Broadcast Group Inc.’s disclosure of funding discussions.

“The paper was weaker yesterday,” a source said. “They want to get more money, and they want to do exchanges. It’s up a bit today.”

Bonds in China’s property developer space stayed flat to weaker on Friday as debt default fears mount following missed bond payments from China Evergrande Group and Fantasia Holdings Group Co. Ltd.

China Evergrande’s notes were flat, while Fantasia’s paper declined ¼ point.

Shanghai-based real estate developer Greenland Global Investment Ltd.’s 5.9% senior notes due 2023 (Ba2/BB-) plunged 11 points during the session to 45½ bid, a market source said.

Shenzhen, China-based real estate developer Kaisa Group Holdings Ltd.’s 11.95% notes due 2022 (B2/B) dove 6½ points to head out at 57 bid. Volume totaled $3 million.

Evergrande rival Sunac China Holdings Ltd.’s notes slid to a high 60s handle, a source reported.

The Tianjin, China-based property developer’s 5.95% senior secured notes due 2025 (B1/BB-) dropped over 3½ points to 68 bid. Trading was steady with $5 million of supply seen on Friday.

Defaults down

In other market news, the U.S. high-yield bond default rate declined for the eighth consecutive month to finish the third quarter at 1%, according to a Fitch Ratings report on Friday.

Fitch said it expects the rate to fall to 0.8% by the end of October, a level last seen in February 2014.

“There have been no U.S. defaults since GTT Communications, Inc.’s missed payment at the end of July,” Fitch noted. “This represents the longest stretch without a default since 2010-2011.”

Year-to-date default volume stands at $5.6 billion, considerably lower than the $62.3 billion registered a year ago.

Roughly 50% of year-to-date default volume comes from bankruptcy filings, 40% from missed payments and 10% from distressed debt exchanges, Fitch said.

PBF notes jump

In the secondary market, PBF’s bonds headed out 9½ points to 11 points higher on Friday, a source reported.

PBF’s 6% senior notes due 2028 (Caa1/B/B+) jumped 9½ points to 75 bid with trading totaling nearly $7 million.

The Parsippany, N.J.-based issuer’s 7¼% senior notes due 2028 (Caa1/B/B+) climbed 11 points to head out at 80 bid in steady supply of over $7 million.

Diamond Sports up

Diamond Sports’ paper traded nearly 1 point to 1½ points better on Friday, sources said.

The 5 3/8% senior secured notes due 2026 (Caa1/CCC) rose nearly 1 point to 62½ bid on $22.25 million of volume and ended the week about ½ point better.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CC) traded 1½ points higher at 40 bid by the end of the day after ending mostly unchanged on Thursday. More than $15.75 million of bonds were traded on Friday.

The senior notes ended the week down 4 points.

Sinclair Broadcast reported continuing efforts to secure new funding for its Chesapeake, Va.-based sports broadcast group in an 8-K filing with the Securities and Exchange Commission on Thursday.

Sinclair said it has made “significant progress” in discussions but no definitive agreement has been reached yet following the Sept. 28 proposal.

The company reported in June that it made two proposals to lenders and noteholders of Diamond Sports dated March 22 and April 29.

“The new proposals are largely the same as the proposals that Diamond Sports Group disclosed in June,” according to a Covenant Review news release on Friday.

Evergrande flat

China Evergrande’s 8¾% senior notes due 2025 (C/C/C) saw $12 million of paper traded on Friday with the issue ending the day flat at 21 bid, a market source said.

The notes are down about 3 points on the week.

The Shenzhen, China-based real estate developer has entered into a 30-day grace period following missed bond payments in September.

Fantasia soft

Fantasia’s 10 7/8% senior notes due 2023 (CC/C) fell ¼ point to 20 bid but were recovered from the week’s lows in the high-teens area, a source said.

The notes have declined from the 32 3/8 bid area seen in the prior week.

Fantasia was downgraded by Moody’s, S&P and Fitch after the company missed the payment on its bond that was due on Monday.

The Shenzhen, China-based property developer has $1.9 billion of offshore bonds maturing through the end of 2022, according to Fitch.

Distressed returns better

Distressed index returns improved on Thursday.

The S&P U.S. High Yield Corporate Distressed Bond index total return for the prior session was 0.35%, compared to minus 0.59% on Wednesday, 0.35% on Tuesday and 0.1% on Monday.

Month-to-date total return narrowed to minus 0.49% on Thursday from minus 0.83% on Wednesday, minus 0.35% on Tuesday and minus 0.6% on Monday.

Year-to-date total returns recovered to 29.59% versus 29.14% on Wednesday, 29.9% on Tuesday and 29.45% at the start of the week.

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