Frontier active post-ratings change, new notes; Cobalt issues plummet after disappointing asset auction

By James McCandless

San Antonio, March 7 – Traders reported spots of activity few and far between on another slow day in the distressed debt market on Wednesday, where most of the volume was taken up by familiar names.

Frontier Communications Corp. notes were some of the most active of the session again. It received a ratings affirmation, a stable outlook and a rating for its new series of notes.

Issues of Cobalt International Energy, Inc. took a sharp fall after it did not receive as much in offers as it had expected for certain assets it was auctioning off.

Community Health Systems, Inc. paper continued to trade after a bevy of news in recent weeks, including the prospect of further hospital closures and ratings downgrades.

Intelsat SA continued to be another favored name in distressed telecom. A down day for oil futures led to an active day for distressed oil names Ensco plc and Northern Oil and Gas, Inc. Elsewhere in the healthcare space, Mallinckrodt plc rolled on as a volume favorite.

Frontier affirmed

Traders confirmed another heavy volume day for Norwalk, Conn.-based wireline telecom name Frontier Communications. The company announced Wednesday that it would be pricing $1.6 billion eight-year second lien notes on Thursday. This led to Moody’s Investors Service to assign a B3 rating to the new notes. It also affirmed Frontier’s corporate family rating, probability of default rating, and senior secured rating while changing its outlook to stable (see related story elsewhere in this issue).

“This string of positive news is exactly what they needed right now,” a trader said.

The company announced last week that it would be rescinding its quarterly dividend to focus more on paying off debt.

The 7 5/8% notes due 2024 slipped to about 61¼ bid. The 10½% notes due 2022 traded up 1¾ points to close at 86¾ bid. The 11% notes due 2025 rose about 1¾ points to close at just above 80 bid.

Cobalt auction disappoints

Houston-based oil exploration company Cobalt saw its issues trading, a market source confirmed, upon receiving what was described as a disappointing series of bids for top assets of the company, totaling around $578 million (see related story elsewhere in this issue).

“The chatter is that it wasn’t as high as they wanted,” a trader said. “They were hoping for a better series of offers, and it looks like they are not going to be getting them.”

The 7¾% issues due 2023 cratered 16¼ points to close at 81 bid.

Community Health active

Franklin, Tenn.-based hospital operator Community Health Systems has had active paper for weeks, bolstered by last week’s dismal Q4 report and warning of future hospital closures. Tuesday, the company received a downgrade from Moody’s Investors Service corporate family rating and its probability of default rating.

The 7 1/8% paper traded up slightly to close just above 81½ bid. While active, the 6 7/8% paper due 2022 remained level at about 62½ bid.

Volume favorites trade

Telecom volume favorite Luxembourg-based satellite communications company Intelsat has been trading heavily since comments about the future of the country’s 5G network alluded to positive effects for satellite firms.

The Intelsat Jackson SA 5½% notes due 2023 dropped 1¼ point to close at 83 bid. The 7¼% notes due 2020 fell ¾ point to close at 94¼ bid.

Another negative day for oil futures led to activity in distressed energy names.

Britain-based oil driller Ensco saw its 5¾% bonds due 2044 shoot up 2 points to close at 70 bid.

Minnetonka, Minn.-based independent oil and gas name Northern Oil and Gas’ 8% issues due 2020 ticked up about ½ point to close at 91½ bid.

Since completing the $1.2 billion acquisition of medical applications firm Sucampo Pharmaceuticals, Britain-based drug maker Mallinckrodt paper have been steadily active.

The 4¾% paper due 2023 traded up about 1 point to close just below 80½ bid.

“People are still staying out until the markets stabilize,” a trader said. “If these tariffs are passed then we could see another downturn, and everybody gets jittery in a volatile, negative market. But until that shakes out we have to just keep an eye on equity markets.”

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