Inauguration mutes activity in distressed market; Avaya pares earlier gains after Chapter 11 filing

By Colin Hanner

Chicago, Jan. 20 – Attention in most of the Western world was directed toward the inauguration of 45th U.S. president Donald Trump on Friday, resulting in activity in the distressed market that paled in comparison to previous sessions in the shortened week, traders said.

“It was a muted session,” a trader said. “Things were very quiet with the presidential inauguration going on.”

Yet, there were a few names that rose above the headline of a Trump presidency to trade on happenings earlier in the week.

One of telecommunications company Avaya, Inc.’s distressed securities traded a “slug of times” but pared gains from Thursday when the company announced it had filed for Chapter 11 bankruptcy, a trader said.

St. Louis-based Peabody Energy Corp.’s shareholders were denied the right to form an official equity committee late Thursday and in response, a series of distressed notes ticked higher.

Hospital operator Community Health Systems, Inc. was very active in the morning, a trader said, with several notes trading up.

Retailer Neiman Marcus Group, Inc. continued to struggle on the weakness that is being felt in the traditional retailer space and trekked further down in two sets of distressed notes.

The contagion of Pearson plc’s announcement of weaker earnings and an asset sale of its book publisher on Wednesday seemed to affect Cengage Learning, Inc., but the education content publisher gained back some earlier losses.

iHeartCommunications, Inc. saw modest gains on a week that reflected similar movement, Intelsat SA did not move on notes that have seen general discord in the past few session, and Mallinckrodt Pharmaceuticals stopped the bleeding following a $100 million settlement with the Federal Trade Commission.

Avaya active

Following a decision to file for Chapter 11 bankruptcy protection, as well as the release of fourth quarter earnings, Avaya Inc.’s distressed notes saw a general resurgence in its distressed bonds on Thursday.

The tone changed on Friday, as the notes submerged to lows felt before the filing.

The 7% notes due 2019 traded down 2 points to 83¼, a trader said, adding that it was very active and traded 50 times.

The 9% notes due 2019 were down ¾ points to 84¼.

Equity committee denied for Peabody

Claiming the rise in coal prices could extend recovery to Peabody Energy shareholders, Mangrove Partners, among others, were denied the request to form an official equity committee on Thursday.

In response, Peabody’s 6½% notes due 2020 were up 1 3/8 points to 51 3/8, a market source said.

For the day, the coal company’s stock was down $2.28, or 57.3%, to $1.70.

Community Health on the up

Healthcare did not come up in President Trump’s inauguration speech on Friday, a reprieve for healthcare groups which have come under attack from Trump and Republicans on the backs of a potential Affordable Care Act repeal.

Community Health Systems traded several points higher on the day, a break from the recent activity the company has felt.

The 6 7/8% notes due 2022 were the most active out of all series of notes and were up 1¼ points to 71¼, a trader said.

The 8% notes due 2019 were busy during the morning session, a market source said, and were up 1¼ to 87. Following just behind were the 7 1/8% notes due 2020, which were up 7/8 point to 80½.

And lastly, the 5 1/8% notes due 2021 were up ¼ point to 94¼, a market source said.

Neiman down, again

It was a steady journey lower for Neiman Marcus Group for the week as Friday capped off a week of generally poor sentiment about brick-and-mortar retailers’ futures.

Neiman’s 8% notes due 2021 were down 1½ points to 63½ a trader said, 5 points lower than the level seen after Tuesday’s session.

Seeing an even bigger decrease were the 8¼% notes due 2021, which saw a 3-point decrease to 58½.

Cengage feeling Pearson effects

After plunging to noteworthy lows on poor quarterly results, Pearson plc seemed to influence other educational publishers, including distressed name, Cengage Learning.

On Friday, Cengage rebounded from previous lows seen mid-week, particularly in its 9½% notes due 2024, which were up ½ point to 88½, a trader said.

In other distressed

Continuing to inch higher were iHeartCommunications, Inc.’s 9% notes due 2021, which were up ¼ point to 76, as well as its 11¼% notes due 2021, which were up ½ point to 79.

Intelsat Jackson Holdings SA’s 7¼% notes due 2019 were unchanged at 81½.

Mallinckrodt’s 5 5/8% notes due 2023 were unchanged at 88¼ on a half-dozen trades, a trader said, finally putting a stop to the losses seen after a $100 million settlement with the FTC that caused bond and stock prices to plummet.

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