Distressed bonds pushed aside for new high-yield issues; Nortel notes up as court battle rages on

By Stephanie N. Rotondo

Seattle, April 7 – Distressed debt again took a backseat to new high-yield issues on Thursday, following a midweek session that saw about $8 billion in deals price.

“Numericable [SFR SA] was the active name of the day,” a trader said, referring to the $5.19 billion 10-year notes deal done on Wednesday. “There was not a lot of distressed stuff.”

But in distressed dealings, a trader said that Nortel Networks Corp.’s bonds “keep rising,” as various creditor groups battle over how to divvy up the $7.3 billion that has been raised via the company’s liquidation.

Among other court battles, iHeartMedia Inc. was given more time on Wednesday to prove that it was allowed to shuffle over $500 million in equity from one unit to another. A Texas court gave the San Antonio-based multimedia company until May 16 to make its case against creditors who claim a default has occurred.

Should the company fail to prove it was justified in moving the assets and creditors are allowed to push a default, that could result in about $15 billion of the company’s approximately $20 billion debt load becoming immediately due and payable.

However, a trader remarked that even that news did little to spark any movement in the bonds.

As for the energy space, things were mixed as oil prices declined on a surprise inventory build at the Cushing delivery point.

Nortel rises

Nortel Networks’ 10¾% notes due 2016 were seen heading higher on Thursday, with one trader placing the issue at 92.

He said that compared to levels around 90½ just two days ago.

Another trader also placed the debt at 92, up 1½ points.

The now-defunct Canadian telecommunications equipment company was back in court this week, as creditor groups continue to fight over how to divide $7.3 billion raised from the company’s liquidation of assets.

The company filed for bankruptcy in 2009. Once the liquidation wrapped, the company’s U.S., Canadian and European units began fighting over who gets what.

A 2015 decision in the U.S. courts represented a loss for bondholders, who were hoping for payment in full on their holdings. The decision instead gave them less than a par recovery.

But as the multiple appeals and cross-appeals are on-going, a federal judge in Delaware said this week that unless the U.S. and Canadian courts can agree, “all of this is going to be for naught because nobody’s going to see a dime.”

Energy space mixed

Distressed energy credits held in rather well on Thursday despite a drop in domestic crude oil prices.

A trader said there was “very little activity” in Halcon Resources Corp.’s debt, despite word from the company on Wednesday indicating that talks with creditors were going well.

However, he did see the 8 5/8% notes due 2020 rising “about 2 points” to a 71½ to 72 context.

Another trader placed the issue at 71 7/8, up “about 3½ points,” he said. The 8 7/8% notes due 2021 meantime edged up “about a point, almost 1½ points” to 18½.

Oasis Petroleum Inc.’s 6 7/8% notes due 2022 were deemed “virtually unchanged” at 74¾.

But after being among the day’s biggest percentage gainers on Wednesday, oil and gas-linked preferred units listed among the day’s worst percentage performers on Thursday.

The downward move came as oil prices ticked down less than 1% – losses were greater earlier in the day – to $37.46. The decline in domestic crude was attributed to new data from Genscape, which showed a nearly 256,000-barrel build of stocks at the Cushing delivery point – even though TransCanada had shut its 590,000-barrel per day Keystone pipeline since Saturday.

Legacy Reserves LP’s 8% series A fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) dropped 14 cents, or 5.51%, to $2.40. That issue had fallen nearly 10% in midweek trading.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were seen losing 22 cents, or 3.78%, to close at $5.60. The units had improved almost 4% the previous day.

And, Vanguard Natural Resources LLC’s 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) declined a dime, or 2.68%, to $3.63.

Of the three issues, Breitburn is the only one still paying distributions.

Valeant firm again

Also in trading, Valeant Pharmaceuticals International Inc.’s debt strengthened on news that the necessary lender approval has been received for the company’s amendment and waiver to its credit facility, and that the amendment and waiver are expected to close next week, according to a trader.

In the bonds, a trader said there were “no big shakes” in terms of movement, though he did see quite a lot of activity in the name.

The trader pegged the 5 7/8% notes due 2023 at 82, up a point. The 6 1/8% notes due 2025 also ended at that level, up just under a point on the day.

The 7½% notes due 2021 meantime improved over 3 points, the trader said, ending at 91¼. The 6¾% note due 2018 ticked up 1½ points to 96.

Also, the term loans C and D were quoted at 97 bid, 97½ offered, up from 96¾ bid, 97½ offered and the term loan E and F were quoted at 96¾ bid, 97¼ offered, up from 96½ bid, 97 offered, the trader said.

Under the waiver, the deadline for filing the company’s form 10-K is being extended to May 31 and the deadline for filing its form 10-Q for the quarter ended March 31 will be extended to July 31. Also, the cross-default to Valeant’s indentures that arose when the 10-K was not filed on March 15 is being waived.

The amendment modifies, among other things, the interest coverage covenant and certain financial definitions to gain additional cushion in covenants, restricts the company’s ability to make certain acquisitions and other investments and to pay dividends and other restricted payments until the financial statements are filed and certain leverage ratios are achieved, and requires net asset sale proceeds to be used to prepay its term loans.

Valeant is a Laval, Quebec-based specialty pharmaceutical company.

-Sara Rosenberg contributed to this article

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