PG&E notes mixed as company misses payment; PHI issues lower as maturity draws near

By James McCandless

San Antonio, Jan. 15 – Distressed debt trading continued its focus on PG&E on Tuesday.

PG&E Corp.’s notes were mixed a day after the company announced that it would file for Chapter 11 bankruptcy and missed an interest payment on a 2040 tranche of senior notes.

In the oil and gas space, PHI, Inc.’s issues moved lower as the market remains aware of the March maturity date of its senior notes.

Despite the upturn in oil futures, California Resources Corp’s., Weatherford International plc’s and Hornbeck Offshore Services, Inc.’s paper ended mixed.

Meanwhile, in telecom, Digicel Group Ltd.’s issues were negative amid a pair of ratings changes.

Sector peer Frontier Communications Corp.’s paper was mixed.

Retailer J.C. Penney Co, Inc.’s notes improved as the company’s executive search continues.

Xerox Corp.’s issues were trading up.

PG&E mixed

Remaining firmly in the front of the market’s activity, PG&E’s notes ended Tuesday mixed, traders said.

The 6.05% notes due 2034 fell ¼ point to close at 80¼ bid. The 3½% notes due 2020 lost 3½ points to close at 78½ bid. The 3.3% notes due 2027 gained ¾ point to close at 76¼ bid.

The notes combined saw about $300 million of the bonds trading by the end of the session.

On Tuesday, the San Francisco-based electric utility informed the Securities and Exchange Commission that it would not be making a $21.6 million interest payment on its 2040 senior notes.

The company announced Monday that it would be preparing to file for Chapter 11 bankruptcy due to potential liabilities in recent California wildfires.

Moody’s Investors Service and S&P Global Ratings reacted by downgrading it to junk status.

“An interesting part of all of this is that there hasn’t been much contagion from it,” a trader said. “Other utilities aren’t getting dragged down with PG&E. But it’s still early.”

PHI lower

In the energy sector, PHI’s issues were lower, market sources said.

The 5¼% notes due 2019 shaved off ¼ point to close at 68 bid.

Amid pressure across the offshore space, the Lafayette, La.-based offshore air services provider’s senior notes have come under increased scrutiny as the March maturity date inches closer.

The paper has been in decline since the company terminated a tender offer for the $500 million outstanding last October.

“Everything offshore is crap,” a trader said. “The people who follow it keep saying that there’s no point in touching it, especially these names that provide services like helicopters, until oil hits $70 per barrel. We seem to be sitting comfortably in the $50’s for the short term.”

Oil futures and oil names

Rising oil futures did not translate to distressed oil names. They showed mixed results.

Los Angeles-based independent oil and gas producer California Resources’ paper was mixed at the Tuesday close.

The 6% paper due 2024 fell ¾ point to close at 70¾ bid. The 8% paper due 2022 gained ¾ point to close at 80¼ bid.

Baar, Switzerland-based oilfield services provider Weatherford’s notes were also mixed.

The 8¼% notes due 2023, rising as high as 62¾ bid during the day, ended level at 62¼ bid, according to Trace data. The 9 7/8% notes due 2024 lost ¼ point to close at 63¾ bid.

Covington, La.-based sector peer Hornbeck’s issues followed the trend.

The 5 7/8% notes due 2020 added ¾ point to close at 58¾ bid. The 5% notes due 2021 dropped 1 point to close at 50½ bid.

At the close on Tuesday, West Texas Intermediate crude oil futures for February delivery rose $1.60 to $52.11 per barrel.

North Sea Brent crude futures ended at $60.64 per barrel after gaining $1.65.

Digicel down, Frontier mixed

Telecom name Digicel’s paper trended downward, traders said.

The 6% paper due 2021 declined ¼ point to close at 92¼ bid.

The Kingston, Jamaica-based cell phone network provider has seen increased activity after completing a tender offer for two series of notes with a majority of holders.

The transaction led to Fitch upgrading the issuer default rating for Digicel and its subsidiaries while cautioning that the terms of the exchange “are viewed as a negative from a governance standpoint.”

Moody’s affirmed a stable outlook but categorized the transaction as a distressed exchange.

Norwalk, Conn.-based wireline telecom name Frontier’s notes were mixed in the session.

The 7 5/8% notes due 2024 fell ½ point to close at 53¾ bid. The 10½% notes due 2022 gave back ½ point to close at 72 bid. The 11% notes due 2025 added 1 point to 64½ bid.

J.C. Penney improves

In retail, J.C. Penney’s issues improved, market sources said.

The 8 5/8% notes due 2025 rose ¼ point to close at 58 bid. The 7.4% notes due 2037 gained ¾ point to close at 40½ bid.

On Tuesday, the market saw optimism in the Plano, Texas-based department store chain after the company announced a slate of executive-level appointments and a “well underway” search for a permanent chief executive officer.

On Monday, Fitch downgraded the company’s long-term issuer default rating and affirmed a stable outlook.

Xerox gains

Xerox’s paper saw a small boost, traders said.

The 3 5/8% paper due 2023 added ½ point to close at 92¼ bid.

The Norwalk, Conn.-based information technology solutions name’s paper has been under pressure over the last month after a downgrade from Moody’s on its senior unsecured debt.

“There wasn’t anything out about it today but these fallen angel names have seen a bit of a rise in activity,” a trader said.

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