Decline in crude pressures distressed oil and gas bonds; Intelsat active, steady; TerraForm trades

By Stephanie N. Rotondo

Seattle, March 29 – The distressed debt market was weakening in Tuesday trading, even as the broader markets firmed up.

Traders also noted that liquidity wasn’t stellar. A speech from Janet Yellen, chairman of the Federal Reserve, was just “one of the excuses,” a trader commented.

In her speech in New York, Yellen said that the central bank must exercise caution when raising interest rates in the future.

But Yellen’s speech wasn’t the only thing holding back distressed investors, according to a trader, as several new high-yield bond issues priced during the session.

As for distressed dealings, another reduction in domestic crude oil prices put the focus back on the energy space.

“Some of the E&Ps were off with oil,” a trader said.

Oil traded down 2.44% to $38.43 a barrel. That was, however, better than the earlier losses. The modest rebound was attributed in part to Yellen’s remarks.

Those remarks were stilted by comments regarding an upcoming meeting of OPEC and non-OPEC producers regarding a production freeze that indicated Iran – which is expected to attend the meeting – might not participate.

Away from oil and gas names, Intelsat SA debt continued to be actively traded, though one trader said that it “didn’t seem like there was a lot of movement in price.”

Market sources meantime gave mixed reviews on TerraForm Global debt. The name was notable Tuesday as the subsidiary of SunEdison Inc. said there was a strong likelihood that its parent organization would have to enter bankruptcy.

Energy names decline

The oil and gas arena was in decline Tuesday, in response to a decline in oil prices.

A trader said Continental Resources Inc.’s 5½% notes due 2022 fell 3 points to 82¾, while the 3.8% notes due 2024 moved down a deuce to 77½.

Oasis Petroleum Corp.’s 6 7/8% notes due 2022 were also waning, losing 3½ points to close at 70¼.

Chesapeake Energy Corp. was another name that was trending lower. At one desk, a trader said the 3.872% notes due 2019 fell 1½ points to 39½. A second market source saw the 6 5/8% notes due 2020 declining 3 points to 39½ bid.

A third source pegged the 8% second-lien notes due 2022 at 48½, which he called down “a couple points.”

As for Whiting Petroleum Corp., its 5¾% notes due 2021 were seen off 1½ points at 65.

One of the biggest losers of the day was WPX Energy Inc., as its 7½% notes due 2020 dropped 5 points to 77.

A trader also noted that “somebody’s been mentioning” Rowan Companies plc, a Houston-based offshore drilling contractor. He said the 4 7/8% notes due 2022 ended at 70½, down 1½ points.

Intelsat remains busy

Intelsat paper continued to move around on Tuesday, though in terms of price movements, bonds were relatively steady.

One trader said the 6 5/8% notes due 2022 were “pretty active,” trading up a quarter-point to 50¾. However, he deemed the 7¼% notes due 2020 as unchanged at 64.

Another trader noted that while paper was on the active side, prices were unchanged.

On March 21, the Luxembourg-based satellite services provider – in fact, the provider that broadcast Neil Armstrong’s walk on the Moon – sold $1.25 billion of 8% notes due 2024. Proceeds from the offering will be used for general corporate purposes, which may include repayment or repurchase of Intelsat Jackson or Intelsat Luxembourg SA debt, including intercompany loans payable to Intelsat Luxembourg and its affiliates by Intelsat Jackson, and for working capital purposes.

But with a $15 billion debtload, Intelsat has been struggling to maintain or increase its revenue stream.

Still, the recently priced deal is hoped to improve the bottom line, at least in the near term.

TerraForm trades

TerraForm bonds were moving around Tuesday as the company – a subsidiary of struggling solar company SunEdison – as the unit said there was “substantial risk” that the parent would soon be facing bankruptcy.

That news followed another report claiming that the Securities and Exchange Commission was looking into SunEdison for overstating its cash position.

But for its part, TerraForm said that while a bankruptcy at the parent organization would be felt, it would not mean the end of the subsidiary.

Still, traders had mixed reviews on the bonds’ performance.

One trader said the 9¾% notes due 2022 declined 3 points to 66 7/8. Another trader said the issue traded as low as 65, but rebounded a little bit to 67.

“It went out closer to 70,” he said, which he called unchanged on the day.

The second trader also saw the 5 7/8% notes due 2023 trading up to 75, which was up from 75 at the open.

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