California Resources leads volume on slow session; Intelsat mixed; Gymboree files Chapter 11

By Colin Hanner

Chicago, June 12 – The distressed debt arena was characterized by “very limited trading activity” on Monday, a trader said, with the most active issue coming from the exploration and production sector.

Traders attributed the lack of motion to routine Monday activity, or lack thereof, and a selloff in bonds, putting bondholders in pause mode for the time being.

Los Angeles-based California Resources Corp. was fractionally lower as oil in the broader market continued to rebound, though other E&P names remained on the up.

Satellite telecommunications company Intelsat SA was “a little bit stronger” in one of its subsidiaries, a trader said, while another trader said bonds were down for another subsidiary.

Children’s goods retailer Gymboree Corp. filed for Chapter 11 bankruptcy on Sunday, though it did not come as a shock to many, a trader said.

“It was no surprise at all,” the trader said.

Holders of general unsecured claims and existing common stock are slated to receive no distribution, the company said in a news release, and its bonds reacted accordingly, trading off to near worthless on limited volume.

California Resources leads activity

With a steep plunge in oil markets last week, the market calibrated on Monday following a joint news conference between the energy ministers of Saudi Arabia and Russia, an Organization of Petroleum Exporting Countries member and a non-OPEC member, respectively.

The ministers reassured markets that the supply cut extension would reach its objective by the time it ends next March.

West Texas Intermediate crude oil was up nearly 0.5% to over $46 a barrel.

In opposition to the move, California Resources’ 8% notes due 2022 were down ½ point to 69, a market source said.

Volume, the highest of any distressed issue for the day, was capped at $18 million, a market source said.

On the other hand, Plano, Texas-based Denbury Resources Corp.’s 6 3/8% notes due 2021 were up ¾ point to 71¾, a market source said, while Canadian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were up 2¼ points to 84¼.

Intelsat mixed

Trading “a little bit stronger” from Friday’s levels, Intelsat Luxembourg Holdings SA’s 7¾% notes due 2021 were up ½ point to 59, a trader said, adding that volume was little more than $4 million.

“It had a decent run off its recent lows,” a trader said of the issue.

The similarly-held 8 1/8% notes due 2023 were down ½ point to 56.

Intelsat Jackson Holdings SA’s 7¼% notes due 2020 were down ½ point to 94½.

And its 5½% notes due 2023 were down 1 point to 84.

Gymboree files for bankruptcy

As seen as no shock to many, children’s retailer Gymboree became the latest brick-and-mortar retailer to fall to bankruptcy, the company said in a filing on Sunday.

The company requested court approval to hold closing sales at up to 450 of its stores, contingent on lease negotiations, a commonality among retailers that are looking to shift focus to online shopping as its primary course of sales.

Gymboree intends to reduce nearly $1 billion in debt as part of its restructuring, including the wipeout of its unsecured notes, which dropped to near worthless during the session.

From its last trade on Thursday, the 9 1/8% notes due 2018 were down nearly its entire worth to more than ½ point on little volume.

Gymboree was facing an uphill battle with a capital structure that “became unsustainable in the face of declining store traffic, negative same-store sales trends and decreasing cash flow,” Fitch Ratings said in a news release on Monday, mirroring similar issues other companies are facing in the sector, while also dealing with large debt loads.

Elsewhere in the retail sphere, Neiman Marcus Group Inc.’s 8¾% notes due 2021 were down 2¼ points to 46¾, a market source said.

Caroline Salls contributed to this review

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