Energy Future ‘volatile’ after NextEra acquisition falls through; California Resources nearly flat; Quorum down

By Colin Hanner

Chicago, March 31 – Though volumes were unsubstantial in the distressed market on Friday, volatility took one distressed energy company by storm, causing an intraday swing in the double-digits, a trader said.

Dallas-based electric utility company Energy Future Holdings Corp. was down severely early in the session, only to rebound as the session closed. The decline comes on the heels of news from Thursday that Energy Future would not be acquired by NextEra Energy Inc., a Juno Beach, Fla.-based nuclear electric power generation company.

In the exploration and production sector, oil capped off a week of gains with a marginal uptick.

Distressed companies were mixed on the session, with California Resources Corp. leading activity, but remaining nearly unchanged on the day.

A day after it announced the completion of a tender offer, Franklin, Tenn.-based hospital operator Community Health Systems, Inc. was down fractionally on “a bunch of trades,” a trader said. The bigger loser in that sector was Community Health-spinoff Quorum Health Corp., two sessions following poor results and an extension of the company’s 10-K filing.

Concordia International Corp. was higher for the third-straight session, and fellow Candian pharmaceutical company Valeant Pharmaceuticals International Inc. was unchanged.

Retailer Neiman Marcus Group, Inc. ticked higher on the session, iHeartCommunications, Inc. was firmer and Intelsat SA was down a round number on the last trading day of the quarter.

Energy’s unknown future

Energy Future Holdings was hit with poor news for noteholders late Thursday when Texas regulators nixed NextEra Energy’s acquisition of the company, according to a Reuters report.

Energy Future’s 11¼% notes due 2017 were trading in “the mid-30s, then the mid-20s, then a 29, 30” handle, a trader said.

The Reuters report said the acquisition – the second time Oncor, a company in which Energy Future holds a majority ownership, has been met with a blockade from regulators – would have placed too much risk on ratepayers.

Emerging from a three-year bankruptcy may have to be completely rewritten, including a plan of reorganization that had included a planned sale to NextEra Energy, sources in the Reuters story said.

Elsewhere in the energy sector, Akron, Ohio-based FirstEnergy Corp., dealing with restructuring issues of its own, were up in its 6.8% notes due 2039, which were up ¼ point to 37¾.

And Allentown, Pa.-based energy and power generation company Talen Energy Inc. – sharply higher on Thursday’s session after a series of tender offers – was unchanged in its 6½% notes due 2025, which remained at 85.

Oil finishes mixed

A week that had seen a resurgence of crude oil prices was capped with a marginal gain on Friday, and distressed exploration and production companies did not stray too far from where they ended Thursday.

Speculation of extending oil production cuts extending into the second half of the year for Organization of Petroleum Exporting Countries non-OPEC members was enhanced by meetings last weekend between member countries and comments this week from Kuwait that support curbing the worldwide glut of supply.

Helping support the need for production cuts – but not helping the upward momentum of crude prices – was weekly news from Baker Hughes that the U.S. oil rig count rose for the 11th consecutive weeks.

In the distressed arena, California Resources’ 8% notes due 2022 were down 1/8 point to 81 5/8, a trader said, while another trader said they were nearly unchanged on the day.

A market source quoted the 8% notes due 2022 at an 80½ bid, 81¼ offer.

Canadian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were down 1 point to 90¼, a market source said.

Hospitals down

Down on “a bunch of trades” were Community Health’s 6 7/8% notes due 2022, which saw a ¼-point decline to 86, a trader said.

Experiencing sharper losses were Quorum Health’s 11 5/8% notes due 2023, which saw a 2½-point loss to 87 3/8, mirroring losses of two sessions prior when the Brentwood, Tenn.-based hospital group announced it was filing an extension for its 10-K filing, on top of poor quarterly results.

On Friday, Quorum, a 36-hospital system, announced the sale of a hospital in Alabama, a day following the divesture of a hospital in Georgia.

Highlighting the company’s results were a $347.7 million loss for the quarter, as well as an operating revenue of $2.14 billion, down year-over-year from $2.19 billion.

Firm pharma

For the third-straight session, Concordia International saw a gain in its 9% notes due 2022, which posted a 1½-point gain to finish at 85.

And Valeant Pharmaceuticals’ 6 1/8% notes due 2025 were unchanged at 77, a trader said.

iHeart higher

Up across the board, iHeart Communications’ 9% notes due 2019 were up ¼ point to 85 on a dozen trades, a trader said.

Its 9% notes due 2021 were up ½ point to 76, and its 9% notes due 2022 were up ½ point to 75½.

Neiman active

For the second session, Neiman Marcus continued to be more active than it had been earlier in the week, a trader said, specifically in the 8¾% notes due 2021, which were up ¼ point to 56¾.

Intelsat up

It was a mixed bag of movement for Intelsat Luxembourg Holdings SA’s bonds on the day, with the 8 1/8% notes due 2023 gaining 5/8 point to 60 5/8.

The 7¾% notes due 2021, on the other hand, were down 1 point to 60¼.

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