American Tire notes improve on recapitalization news; Intelsat issues rise as subsidiary preps $2 billion issue

By James McCandless

San Antonio, Sept. 5 – The distressed debt market saw trading on Wednesday continue to fixate on names with recent developments.

American Tire Distributors’ notes rose on reports that the company reached an agreement with 70% of its creditors to recapitalize and wipe away about $1.1 billion in debt.

Intelsat SA’s issues improved as a subsidiary prepared to tap the market with a $2 billion offering of six-year senior notes.

Digicel Group Ltd. paper traded mixed. On Friday, the company announced a note exchange and saw a ratings downgrade.

Frontier Communications Corp.’s notes declined, extending a downward trend that started after a worse than expected second-quarter report.

Sanchez Energy Corp.’s issues gained, continuing to attract more volume from distressed traders in the energy space.

Mallinckrodt plc paper improved in the medical space.

American Tire up

Huntersville, N.C.-based tire distributor American Tire’s notes gained, traders said, after the company announced late Tuesday that it had reached an agreement with 70% of its bondholders to convert their debt into a 95% stake of its restructured common equity. The move would reduce the company’s debt by $1.1 billion. The company is also working to extend the maturity of its revolving credit facilities and term loan.

On Wednesday, Moody’s Investors Service downgraded the company’s probability of default rating and senior subordinated notes rating. Standard & Poor’s lowered its long-term issuer credit rating and issue ratings on its senior subordinated notes.

“It’s a little surprising because I’m hearing that one of their sponsors is walking away from them in the process,” a trader said. “But they had to come to some sort of deal eventually.”

The 10¼% notes due 2022 rose about ¼ point to close at 29¼ bid.

On Tuesday, the 10¼% notes lost about 6 points.

Intelsat rises

Luxembourg-based satellite communications company Intelsat’s issues improved, market sources said, as subsidiary Intelsat Jackson Holdings SA prepares an offering of $2.25 billion issue of six-year senior notes. The company also plans to hold a tender offer for its 7¼% senior notes due 2020 in connection with the offering.

Recently, subsidiary Intelsat Connect Finance SA priced a $1.25 billion offering of senior notes due 2023.

The Intelsat Jackson 5.5% notes due 2023 rose about ½ point to close at 91¾ bid. The Intelsat (Luxembourg) SA 8 1/8% notes due 2023 added about ½ point to close at around 87 bid.

On Tuesday, the 8 1/8% notes rose ¼ point.

Digicel mixed

Bermuda-based mobile phone network provider Digicel paper ended mixed, traders said. Last Friday, the company announced an exchange offer for any and all of its outstanding $2 billion 8¼% notes due 2020 and any and all of its outstanding $1 billion 7 1/8% notes due 2022 for new notes to be issued by its subsidiaries.

After the announcement, Moody’s Investors Service lowered the company’s corporate family rating and issue-level ratings. Fitch Ratings downgraded the long-term issuer default rating of the company and its subsidiaries and affirmed a negative outlook.

“Over the past few weeks or so, Digicel has caught the attention of a lot of distressed guys,” a trader said. “They’re getting a lot more scrutiny as they work through the mess they’re in.”

The 6% notes due 2021 lost ½ point to close at 89 bid. The 7 1/8% notes due 2022 rose 1½ points to close at 56½ bid.

On Tuesday, the 6% notes dropped about 4 points and the 7 1/8% notes fell 11 points.

Volume names trade

Elsewhere in distressed telecom, Norwalk, Conn.-based wireline communications name Frontier Communications issues declined.

Following a negative second-quarter earnings report, Standard & Poor’s downgraded its issuer credit rating, senior unsecured debt rating and affirmed a negative outlook.

The 7 5/8% notes due 2024 fell about ¾ point to close at 62¼ bid. The 10½% notes due 2022 lost about ¾ point to close at around 87 bid. The 8 1/8% notes due 2023 dropped about ¾ point to close at around 75½ bid.

On Tuesday, the 7 5/8% notes shaved off about ¾ point, the 10½% notes rose about ¼ point and the 11% notes lost ¾ point.

Houston-based independent oil and gas producer Sanchez Energy issues rose. A recent second-quarter earnings report showed a 38 cents per share loss, missing analyst estimates of a 5 cents per share loss.

The 6 1/8% notes due 2023 picked up about 1 point to close at around 56 bid.

On Tuesday, the 6 1/8% notes lost about 1¾ points.

Staines-upon-Thames, U.K.-based drug maker Mallinckrodt paper saw gains in the medical space.

The 4¾% notes due 2023 rose about 1 point to close at around 87½ bid.

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