PHI notes partially recoup losses; Sears notes down on bankruptcy; energy names weaken

By James McCandless

San Antonio, Oct. 15 – The distressed space started a new week with trading continuing a negative trend set on Friday.

After PHI, Inc. cancelled a cash tender offer for its 5¼% notes due 2019 on Friday, the company’s notes recovered somewhat from Friday’s losses.

In retail, Sears Holdings Corp.’s notes fell again as the company filed for bankruptcy early Monday with plans to continue operations through the holidays. Sector peer PetSmart, Inc.’s paper saw mixed results while Rite Aid Corp. held steady despite a ratings downgrade.

In the oil and gas sector, Sanchez Energy Corp. and California Resources Corp.’s notes declined despite an uptick in oil futures. Hornbeck Offshore Services, Inc. rose.

Elsewhere in the energy space, Westmoreland Coal Co.’s notes jumped after hitting a low as the company filed for bankruptcy last week.

Meanwhile, Hexion Inc.’s notes saw multi-point losses, catching the attention of the market.

PHI gains

PHI’s notes recovered some of last week’s losses, traders said.

The 5¼% notes due 2019 rose 4¾ points to close at 87½ bid.

On Friday, the 5¼% notes dropped 8½ points after the Lafayette, La.-based offshore air services company announced that it had terminated a cash tender offer for the $500 million outstanding of the notes.

The company had previously extended the deadline for the tender several times and only received offers for $400 million, Prospect News reported.

“That was surprising to some people,” a trader said. “It’s made them the topical name of today.”

The company has hired Houlihan Lokey as financial adviser to explore alternative financing solutions.

“They’ll have to do some kind of exchange eventually,” another trader said.

Sears bankrupt

Sears’ notes struck lower on Monday, market sources said.

The 8% notes due 2019 lost about 4¼ points to close at around 8 bid. The 6½% notes due 2028 fell about 7 points to close at around 35½ bid.

Just after midnight ET on Sunday, the company filed for Chapter 11 bankruptcy, reporting more than $11 billion in debt.

The Hoffman Estates, Ill.-based department store chain plans to shutter 142 unprofitable stores by the end of the year in addition to the 46 stores that it had previously planned to close by November

Chief executive officer Eddie Lampert has stepped down from the post but will remain on as chairman. The company is in negotiations to secure $300 million in rescue financing from Lampert’s firm, ESL Investments.

After the filing, S&P Global Ratings lowered the company’s issuer credit rating. Fitch Ratings lowered the company’s long-term issuer default rating.

Elsewhere in the sector, Phoenix-based pet supplies retailer PetSmart’s paper was mixed.

The 8 7/8% paper due 2025 gained ¼ point to close at 72 bid. The 5 7/8% paper due 2025, while moving ¼ point lower in intraday trading, held level at 80¾ bid.

Camp Hill, Pa.-based drug store chain Rite Aid saw its notes moving lower after a ratings downgrade but ultimately recovering.

The 7.7% notes due 2027, which moved as low as 72 bid, according to Trace data, ended flat at 77 bid.

On Monday, Moody’s Investors Service downgraded the company’s corporate family rating, probability of default rating and the ratings on the company’s senior secured revolving credit facility, senior unsecured guaranteed notes and senior unsecured notes.

Energy weaker

Despite another rise in oil futures, bellwether energy tranches were weaker, traders said.

Houston-based independent oil and gas producer Sanchez Energy’s 6 1/8% notes due 2023 lost 1½ points to close at 55 bid.

Los Angeles-based peer California Resources’ issues were mixed.

The 6% notes due 2024 gained 1½ points to close at 89½ bid. The 8% notes due 2022 dropped ¾ point to close at 96¾ bid.

West Texas Intermediate crude oil futures were up 44 cents by the end of Monday to $71.78 per barrel. North Sea Brent crude oil futures added 25 cents to $80.68 per barrel.

“There’re some indicators that are giving people a little more confidence that oil is going to sustain these higher prices,” a trader said. “South Korea didn’t buy any oil from Iran last month. A lot of people are pointing to that. Sanctions are going in against Iran pretty soon.”

Elsewhere in the sector, Hornbeck Offshore’s notes rose.

The 5 7/8% notes due 2020 picked up about 1 point to close at around 79 bid.

The notes snapped a four-day decline after hitting 81 bid last week.

As previously reported, investors expressed concerns last week about the Covington, La.-based maritime oil services company’s liquidity structure and whether it will be able to sufficiently cover securities coming due over the next few years.

Westmoreland higher

In the coal space, Westmoreland’s notes soared, according to market sources.

The 8¾% notes due 2022 jumped up 12¾ points to close at 42½ bid.

Previously, the notes had been trading in the 20 context after the Englewood, Colo.-based coal producer declared bankruptcy on Oct. 9, Prospect News reported. Last Thursday, Moody’s lowered the company’s probability of default rating, corporate family rating and all instrument ratings.

“I was expecting it to reach this level, just not this quickly,” a trader said.

Hexion drops

Hexion’s paper was moving lower, traders said.

The 6 5/8% notes due 2020 fell 1¾ points to close at 89¼ bid. The 9% notes due 2020 lost about 2¾ points to close at 75½ bid.

“We’re hearing a lot of factors surrounding this,” a trader said, pointing to the Columbus, Ohio-based chemical company’s troubles as a supplier in the current trade climate, a weakness in chemical names overall, and securities that are set to mature soon.

“There’s no one reason for the negativity,” the trader said. “But they’re getting killed.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.