Talen notes slide, CDS spreads move out; Transocean up as oil rallies; Staples better

By Cristal Cody

Tupelo, Miss., March 17 – Talen Energy Supply LLC’s bonds slid on Thursday with the 10½% senior notes due 2026 (Caa2/CCC/CCC) now trading in the high 20s and about 10 points lower on the week.

Talen’s credit default swap spreads also moved out over 2,500 basis points for the week ended Wednesday.

Distressed bonds in the oil space climbed on Thursday after oil futures rallied past $100 a barrel.

Transocean Inc.’s bonds traded about 1½ points to 2 points higher.

Brent crude oil prices for May delivery were up $8.62 to $106.64 a barrel by the day’s end.

West Texas Intermediate crude oil benchmark futures for April deliveries settled up $7.94 at $102.98 a barrel.

Market tone improved while volatility waned in the U.S. markets on Thursday following the Federal Reserve’s 25 basis point rate hike the previous day.

The iShares iBoxx High Yield Corporate Bond ETF added 56 cents to end at $82.26.

The Chicago Board Options Exchange’s CBOE Volatility index receded 4.87% to 25.61.

In other secondary issues, Staples Inc.’s 10¾% senior notes due 2027 (Caa1/CCC+) were about 3½ points stronger on the week, while its CDS spreads widened over 80 bps.

Talen notes, CDS weaken

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) declined 3½ points on Thursday to 27½ bid, about 10 points lower on the week, a source said.

Secondary supply was strong with $20 million of the bonds traded.

The issue has dropped from the 46 bid range seen at the end of February.

Talen’s 6½% senior notes due 2025 (Caa2/CCC/CCC) declined over 3½ points on Thursday to 26 bid on $8.4 million of volume.

The 6½% notes were trading 6 points lower on the week.

Meanwhile, the Woodlands, Tex., and Allentown, Pa.-based power company’s CDS spreads widened 2,516 bps to 7,717 bps for the week ended Wednesday, according to a report from Moody’s Investors Service on Thursday.

Talen’s CDS spreads have increased 3,549 bps since the week of Feb. 23.

Transocean bonds gain

Transocean’s 7½% senior notes due 2026 (Ca/CCC) jumped about 2 points to 82 bid by late afternoon, a market source said.

The Vernier, Switzerland-based offshore driller’s 6.8% senior notes due 2038 (C/CCC) traded about 1½ points better on the day at 61 bid.

Transocean’s 8% debentures due 2027 (Ca/CCC+) were the company’s most active issue in the secondary space on Thursday with over $15 million of bonds traded up 2 points to 80½ bid.

Staples mixed

Staples’ 10¾% senior notes due 2027 (Caa1/CCC+) improved about ¾ point to a print of 88.395 bid by the end of the session, a source said.

The notes were about 3½ points stronger on the week though down about 5 points so far in March.

Staples’ CDS spreads were softer this week.

The Framingham, Mass.-based office supply chain’s CDS spreads widened 83 bps for the week ended Wednesday to 1,311 bps, according to a Moody’s report.

Distressed index up

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return was positive on Wednesday at 0.67% versus minus 0.91% on Tuesday and minus 1.07% on Monday.

Month-to-date total returns posted at minus 4.18% on Wednesday, minus 4.81% on Tuesday and minus 3.94% at the start of the week.

Year-to-date index returns were at minus 7.38% on Wednesday, minus 8% on Tuesday and minus 7.15% on Monday.

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