Intelsat improved on financing; energy names firm despite oil retreat; Puerto Rico debt quiet

By Paul Deckelman

New York, June 30 – The distressed debt market was mostly quiet on Thursday heading into the July 4th holiday break in the United States, traders said. They said that activity was mostly subdued on the last full trading session of the week. Friday’s session will have an early close and the debt markets will be shuttered altogether on Monday.

However, traders said that Intelsat SA’s bonds were busy and trading at mostly higher levels, aided by the news that the communications satellite company had completed a $490 million private placement note financing, planning to use the proceeds to fund its pending tender offer for three series of notes.

The traders said that energy issues such as California Resources Corp. and Oasis Petroleum Inc. were seen adding to their gains of the past several sessions, even though oil prices turned southward.

Puerto Rico’s bonds were quiet, even as the troubled island commonwealth got some good news on two fronts – final passage and a presidential signature on federal legislation aimed at helping its tangled finances, and an agreement between the island’s electric power authority and its bondholders averting a default on the authority’s paper. But the federal aid measure won’t take effect quickly enough to avoid Friday’s looming payments deadline on Puerto Rico’s bonds.

In the convertibles market, SolarCity Corp.’s recently battered bonds were seen having recovered some of their lost ground.

Intelsat shows improvement

Traders said that activity was muted on the last full trading day of the week before the break – and the last full trading day of the month.

But one name which stood out, they said, was Intelsat.

“It was one of the notable ones, on the news they got new financing,” one of the traders said.

He said that that Luxembourg-based communications satellite company’s existing 8% senior secured first-lien notes due 2024 “initially traded off about 2 points but then they ended up ½ point,” closing out at 99½.

He said that its unsecured Intelsat Jackson Holdings SA and Intelsat (Luxembourg) SA bonds were also up on the news, with the latter’s 7¾% notes due 2021 “getting as high as 25” from earlier prices around the 20 mark.

Intelsat announced that it had sold $490 million of new 9½% senior secured notes at 98 in a private placement transaction aimed at raising funds to finance its current tender offer for three series of its existing bonds.

A second trader said that he had seen “nothing” trading in the new paper, noting that “it was a private deal, probably put away.”

He did say that the 8% notes due 2024 “traded pretty well, volume-wise,” with over $86 million seen having changed hands.

He saw those bonds finishing up by ¾ point on the day at 98¾ bid.

At another desk, a market source saw the 8% notes ending about unchanged on the day at 99 bid.

Intelsat Jackson’s 6 5/8% notes due 2022 were 3 point gainers on the day, ending at 68 bid.

Its 7½% notes due 2021 ended up 2¾ points at 69 bid.

Energy up though oil was down

Elsewhere, a trader said that “even though oil was off by $1.50, some of the energy names were better,” riding on the momentum they had built up over the previous two sessions when crude prices were surging.

For instance, he saw Houston-based exploration and production operator Oasis Petroleum’s 6 7/8% notes due 2022 better by ½ point at 92½ bid.

Another trader saw those bonds going home ¾ point better at 92¾ on brisk volume of over $13 million.

He said that California Resources’ 8% notes due 2022 up ¼ point at 71¾ bid, with over $21 million traded.

“CalRes 8s were pretty active around 71, which was about unchanged,” versus a 71 to 71½ bid range on Wednesday, a market source at another desk said.

“Bonanza Creek Energy Inc. was active, but kind of unchanged around 40½,” one of the traders said.

“There was not much price action.”

Over $13 million of the Denver-based E&P company’s bonds traded.

Puerto Rico bonds hold gains

Puerto Rico was in the news on Thursday as president Barack Obama signed legislation aimed at helping the troubled island commonwealth straighten out its tangled finances and the Puerto Rico Electric Power Authority reached agreement on avoiding a bond default with creditors holding around 70% of its debt.

Even so, a trader said, “Puerto Rico wasn’t all that active” in Thursday trading.

He said the only issue that really trades around normally is the commonwealth’s general obligation 8% bonds due 2035.

He said that they were in a 66¾ to 66 7/8 bid range, “about where they’ve been over the last few days,” although he allowed that the bonds had traded up around 1 point on Wednesday from “a 65 handle.

“But they were unchanged today, on limited trading.”

Congress passed and the president signed into law legislation setting up a federally appointed oversight board.

That body will have as its mission bringing balance to Puerto Rico’s budget and managing its debts.

However, while that might prove to be an advantage in the long run, Puerto Rico faces payments on its debt totaling $2 billion on Friday and has indicated that it has no way of paying that sum.

Things are not quite as bad for the Puerto Rico Electric Power Authority, which said in a news release that it intends to pay all the principal and interest due on its debt on July 1 by virtue of revenue bonds in accordance with an agreement with creditors holding roughly 70% of that debt.

The authority said it will fund the $415 million payment through operational funding and the sale of refinancing bonds.

The refinancing bonds will have a combined interest rate of 8.46%, with maturities ranging from four years to six years.

“We are pleased to have reached an agreement that allows us to make the payment to the holders of bonds and avoid a breach,” chief restructuring officer Lisa Donahue said in the release.

“As a result of these agreements, we have retained our cash position to the extent that we continue implementing an operational restructuring.”

In addition, the authority said its restructuring support agreement was extended until Dec. 15. As part of this extension, the authority reached an agreement with bond insurer Syncora Guarantee Inc. in connection with a recovery plan.

Solar City converts better

In the convertibles market, SolarCity’s 2019 bonds recovered some ground on Thursday, ending the session at 71 compared to 66 on Wednesday, when they had dropped 5.5 points, according to Trace data. But the SolarCity convertibles are still trading lower than they had been compared to the initial pop on news that Tesla Motors Inc. is attempting to buy the company.

“There is uncertainty about whether the deal could go through,” a Connecticut-based trader said.

Tesla’s own converts were meantime weaker on Thursday.

The Tesla 1.5% convertibles, which are the most affected by tight borrow given their heavier delta, were suffering the most. The Tesla 1.25% convertibles due 2021 traded a bit, according to Trace data. And that paper was down 0.5 point on an outright basis to 82.337.

Tesla shares had traded down initially on Thursday but were last positive by $2.22, or 1%, at $212.41 at the end of the session.

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