Evergrande bonds up; Transocean, Talen higher; Diamond Sports paper mixed; Telesat off

By Cristal Cody

Tupelo, Miss., March 22 – China Evergrande Group’s dollar bonds edged up in light distressed trading activity on Tuesday following the company’s announcements that included reporting a delay in posting its 2021 audited results.

Market sentiment was up from the start of the session and continued through the day, sources said.

The iShares iBoxx High Yield Corporate Bond ETF rose 42 cents to end at $82.

Oil was modestly lower after climbing over $7 on Monday.

West Texas Intermediate crude oil benchmark futures for April deliveries settled Tuesday down 36 cents to $111.76 a barrel.

Offshore driller Transocean Inc.’s bonds held onto Monday’s gains with its 8% debentures due 2027 (Ca/CCC+) adding ¼ point in strong trading activity on Tuesday.

Talen Energy Supply LLC’s distressed notes, now yielding over 50%, were among the most traded junk bonds on Monday and continued to remain active on Tuesday, according to market sources.

Talen’s notes were about ¾ point to 2¾ points better on Tuesday but remained lower on the week.

Diamond Sports Group LLC’s 6 5/8% senior notes due 2027 (Ca/CC) edged up 1/8 point in heavy secondary supply on Tuesday of more than $22 million, while its 5 3/8% second-lien secured notes due 2026 (Caa3/CC) remained soft in thin trading.

Diamond Sports is the first media and entertainment default of 2022 following the company’s distressed debt exchange, S&P Global Ratings said on Monday.

Year to date, the global corporate default tally now totals 12.

Telesat Corp.’s bonds were busy during the session following the company’s weak fourth-quarter earnings report and conference call on Friday where management mentioned being “not happy” with the company’s bond trading levels, a source said.

“They bounced a decent amount,” the market source said.

Evergrande higher

China Evergrande’s distressed offshore bonds edged up in light trading activity on Tuesday following the company’s announcements, according to a market source.

Evergrande’s 8¾% senior notes due 2025 (C//C) rose ¼ point to a 13.20 print after improving ¾ point in the prior session.

Trading was halted on Monday in Evergrande’s Hong Kong Stock Exchange-listed shares and structured products pending an announcement by the distressed Shenzhen, China-based real estate developer.

Evergrande reported in regulatory filings released on Tuesday that it will not able to complete required audit procedures in time to post its 2021 audited results on or before March 31.

The company notes that the suspension in trading of its stock and structured products will remain until the results are posted.

In a separate filing, Evergrande said principal subsidiary Evergrande Property Services Group Ltd. will establish a committee to investigate after finding RMB 13.4 billion of its deposits were used as security for third-party pledge guarantees.

Evergrande also reported in another filing that the company’s risk management committee “is actively looking for solutions and communicating with its creditors” and proposes to hire an additional legal adviser to assist with mitigating and eliminating the risks relating to its debts, following up with demands from creditors and dealing with the debts issue on a fair and equitable basis.

Evergrande has $3.5 billion of senior notes due in 2022.

The space is widely expected to see heavy defaults in 2022 after issuers including Evergrande, Kaisa Group Holdings Ltd., Fantasia Holdings Group Co. Ltd., Sinic Holdings (Group) Co. Ltd., China Properties Group Ltd., Modern Land (China) Co. Ltd. and Sunshine 100 China Holdings Ltd. missed bond payments in 2021.

Transocean improves

Transocean’s 8% debentures due 2027 (Ca/CCC+) picked up ¼ point to head out at 81¾ bid on $14 million of paper traded on Tuesday, a source said.

The Vernier, Switzerland-based offshore driller’s paper traded about 2 points better in the secondary market on Monday.

Talen trades up

Talen’s bonds improved on Tuesday but remained lower week over week, sources said.

Talen’s 6½% senior notes due 2025 (Caa2/CCC/CCC) traded about ¾ point better to 31 bid.

The notes rallied 3 points on Monday after ending the prior week about 4½ points lower.

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) jumped 2¾ points by the day’s end, going out at 33 bid on $2.7 million of supply.

The notes recovered 1¼ points in Monday’s session after ending the previous week about 8¼ points lower.

The Woodlands, Tex., and Allentown, Pa.-based power company’s credit default swap spreads ended the prior week over 2,500 basis points wider.

Diamond Sports mixed

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CCC-) rose 1/8 point to trade near the 21¼ bid range on more than $22.27 million of secondary supply on Tuesday, a source said.

The company’s 5 3/8% second-lien secured notes due 2026 (Caa3/CCC+) were seen in thin volume trading around 39 bid, off about 1 point to 1½ points from last week.

“It’s down compared to last week, but there’s not too much movement,” one source said.

Diamond Sports’ parent, Sinclair Broadcast Group Inc., reported at the start of the month that the company completed its new money financing transaction and exchange of term loans and notes, which included exchanging the new 5 3/8% second-lien notes for its 5 3/8% senior secured notes due 2026.

The Chesapeake, Va.-based sports broadcast group is the first media and entertainment default of 2022, S&P said in a report on Monday.

Telesat softens

Telesat Canada LLC’s paper softened on Monday but continued to trade higher on the week, sources said Tuesday.

Telesat’s 6½% senior notes due 2027 (Caa1/B) were last seen on Tuesday at 49½ bid, down about 1¾ points from Monday.

“It did touch 50½ as well, but now it’s down back to 49½,” one source said. “They were mid-last week around 44, 44½, then last Friday, they shot up to around 51½, so they’re still up from last week.”

The issue jumped 6½ points on Friday after the company reported fourth-quarter results.

Telesat Canada’s 4 7/8% senior secured notes due 2027 (B1/BB-) fell nearly 2¼ points to a print of 72.438 in light trading on Tuesday.

The secured notes were 6¼ points better at 75¼ bid on Friday.

The Ottawa-based satellite communications company reported on Friday that fourth-quarter consolidated revenue fell 7% and net income sank to $97 million from $255 million a year ago.

Distressed returns positive

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return was 0.08% on Monday, down from 0.55% on Friday but better than the minus 1.07% return in the same session a week ago.

Month-to-date total returns improved to minus 3.04% from minus 3.11% on Friday and minus 3.94% in the March 14 session.

Year-to-date index returns came in to minus 6.29% from minus 6.36% on Friday and minus 7.15% in the week ago session.

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