FirstEnergy notes skyrocket on creditor agreement; Sears paper mixed after asset offer

By James McCandless

San Antonio, April 23 – Traders reported a higher level of activity as the week began in the distressed debt market as companies begin to post their first-quarter numbers.

FirstEnergy Solutions’ notes saw multi-point gains after it reached an agreement with creditors in its Chapter 11 proceedings.

Sears Holding Corp.’s notes were mixed after CEO Eddie Lampert announced he would purchase Sears’ Kenmore brand after being listed for sale for two years.

Sanchez Energy Corp.’s paper fell for a second day after the company posted disappointing oil production numbers during the first quarter.

Intelsat SA’s notes declined, still trading on news that a subsidiary would take part in a government project. Frontier Communications Corp.’s notes fell as it searches for a buyer for certain assets. Community Health Systems, Inc.’s notes weakened on the day.

FirstEnergy reaches agreement

FirstEnergy Solutions, a subsidiary of Akron, Ohio-based electricity producer FirstEnergy Corp., saw multi-point gains in its notes after the company announced that it has reached an agreement in principle with two groups of key creditors in the Chapter 11 proceedings (see related story elsewhere in this issue).

“This is good for people who own these notes,” a trader said. “The jury’s still out on whether they’re getting the federal aid they requested, but this is arguably better news, at least for stakeholders.”

The 6.05% notes due 2021 gained about 12¾ points to close at around 44½ bid. The 6.8% bonds due 2039 jumped up about 10½ points to close at around 43¼ bid. The 6.85% bonds due 2034 rose about 16½ points to close at 44¾ bid.

Sears mixed on sale

Hoffman Estates, Ill.-based retailer Sears saw notes mixed after reports confirmed that CEO Lampert would purchase the Kenmore brand from the company on behalf of his investment firm and majority owner of Sears, ESL Investments. The brand was on the market for two years without a bidder.

“I imagine there’s a dozen or so more moves like this coming before bankruptcy,” a trader said.

The 6 5/8% notes due 2018 traded down about 1¾ points to close at around 82¼ bid. The 8% notes due 2019 rose 13 points to close at 51 bid.

Sanchez down

Houston-based independent oil and gas producer Sanchez Energy’s paper declined again, according to a market source, after the company posted oil production numbers on Friday that were well under estimates. The company cited a weather-related disruption, a temporary problem with third-party natural gas infrastructure, and some operational issues due to testing new ways to complete wells for its issues and sought to reassure investors.

The 6 1/8% paper due 2023 shaved off about 2 points to close at around 73½ bid.

On Friday, the paper lost about 3¾ points.

Volume names trade

Luxembourg-based satellite communications company Intelsat’s notes were off, returning some gains made last week after the company announced a subsidiary’s involvement in a satellite payload project for the Federal Aviation Administration.

The Intelsat Jackson SA 5½% notes due 2023 lost about ¼ point to close at around 84¼ bid. The 7¼% notes due 2020 fell about ¼ point to close at around 97 bid.

Norwalk, Conn.-based wireline telecom name Frontier Communications’s issues declined as the company seeks bids for certain assets.

The 7 5/8% notes due 2024 lost about ½ point to close at around 64½ bid. The 10½% notes due 2022 dropped about 2 points to close at around 87¼ bid. The 11% notes due 2025 fell about 1¼ points to close at 77 bid.

Franklin, Tenn.-based hospital operator Community Health Systems’ paper declined on Monday. The company’s latest part of its divestiture plan took place last Wednesday when the company announced the sale of another hospital.

The 7 1/8% paper due 2020 fell 1 point to close at 80¾ bid. The 6 7/8% paper due 2022 lost about 1 point to close at around 55 bid.

“Activity is picking up,” a trader said. “Earnings have a way of jumpstarting the market. Whether that can be sustained depends on volatility in the equity markets, as well, so we’ll have to wait and see.”

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