Intelsat, Avaya down on otherwise quiet day; Valeant, Community Health quieter; E&P mixed as oil drops

By Colin Hanner

Chicago, Jan. 9 – Activity was on the quiet side in the distressed market on Monday, traders said, as energy securities hid as oil prices declined, and general activity moved modestly in either direction.

“It was on the quiet side of things today,” a trader said.

After a week characterized by a strengthening hospital sector, bustling exploration and production securities and the downswing of brick-and-mortar retailers, few names truly saw significant activity on the session.

Satellite communication provider Intelsat SA was down several points in a few of its securities, though no specific drivers brought down the notes.

Similarly, Avaya Inc., down heavily on Friday, was offered another point lower on Monday’s session, a trader said, adding that the technology company seems to be trending lower as the prospects of filing for Chapter 11 seem to be mounting.

Valeant Pharmaceuticals International, Inc. and Community Health Systems, Inc. – both companies who were trending higher last week – did not veer far from where they started on Friday.

Oil future prices were down, breaking a four-day streak of straight gains, and distressed securities were mixed as a result, including California Resources Corp., which was down a round number, and Pacific Drilling Co., which swung the other direction.

As for the sessions ahead, a trader said to stay in tune with the new issue calendar, particularly if there are more in the coming sessions.

“If we see an increase there, we could see prices sloshing around a bit,” he said. “The market had a pretty good run-up last week, [with] inflows in the market, and guys have been generally buying risk on appetite. The market has been grinding higher and tighter, and if all of a sudden you see some supply coming into the market, you could start seeing some volatility in the secondary’s as opposed to it all being one-way.”

Intelsat down

Though there appeared to be no specific drivers of the turnaround, some of Intelsat’s distressed securities were “definitely weaker” on the session, a trader said.

Specifically, the 5½% notes due 2023 were down 1 1/8 points to 67 5/8, the trader said, while the 12½% notes due 2022 were down 2¼ points to 63.

“Granted, it was moving up a bit last week, so maybe there was some profit-taking” taking place, a trader said.

DIP talk brings down Avaya

On Friday, Santa Clara, Calif.-based Avaya Inc.’s 10½% notes due 2021 were trending lower once news was released about the company calling for new terms of debtor-in-possession financing, a trader said.

The same trader said the notes were offered at a 28 handle on Monday.

“They’re wide, but they’re trending toward the mid-20s,” the trader said. “It seems like prospects of them filing soon seem to be mounting.”

Last week, Avaya’s 7% notes due 2019 dove several points throughout the week, eventually finishing in the mid-80s.

Healthcare’s small moves

With the second week of a new Congress beginning Monday, the race to dismantle the Affordable Care Act is in the crosshairs for Republicans, and more decisions surrounding a budget to begin that process are slated for later this week.

Last week, distressed hospital company Community Health was up several points on prospects of such an event coming to light but slowed on Monday to modest declines.

A trader saw Community Health’s 6 7/8% notes due 2022 down 1/8 point to 76.

Pharmaceutical companies Valeant Pharmaceuticals and Concordia International Corp. also swung the midst of last week’s discussions and continue to be mixed on Monday.

Valeant’s 6 1/8% notes due 2025 were down 5/8 point to 76 on “loads of trades,” a trader said.

“I don’t know why that one” was active in particular, the trader said.

The 5 7/8% notes due 2023 were up ¾ point to 76¾, and the 6 3/8% notes due 2020 were down 1¼ points to 87½.

Speculation continued to swirl around Valeant on Monday as Takeda Pharmaceutical Co. – seen as a potential bidder for Valeant’s Salix Pharmaceuticals – bought Ariad Pharmaceuticals for $5.2 billion, further enhancing the question on whether or not the Japanese pharmaceutical company will continue to pursue Salix.

For Concordia, its 9½% notes due 2022 were up “almost a point” to 39, a market source said.

E&P mixed, and quiet

While oil futures broke their fourth-straight day of gains on Monday, distressed E&P companies reacted in both directions.

Offshore driller Ensco plc’s 5.2% notes due 2025 were up ¼ point to 88 5/8, a trader said.

GenOn Energy Corp.’s 9½% notes due 2018 were up 3/8 points to 71 7/8.

Rounding out the notable gainers was Pacific Drilling’s 7¼% notes due 2017, which were up “1 and change” to 47 7/8, a trader said.

On the down side, California Resources’ 8% notes due 2022 were down 1 point to 90.

Distressed round-up

Caught in the whirl of downgrades that hit brick-and-mortar retailers last week was Neiman Marcus Group, Inc., which also withdrew its initial public offering a year-and-a-half after it filed for it.

Activity with the retailer was nearly unchanged on Monday, a trader said, especially the 8% notes due 2021, which were unchanged at 70.

And the 8¾% notes due 2021 were down ½ point to 66½ on a single trade, a market source said.

iHeartCommunications, Inc.’s 10% notes due 2018 were up 7/8 point to 74 3/8, a trader said, and the 9% notes due 2021 were up ½ point to 75¾.

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