McDermott notes trade higher in bankruptcy aftermath; Delphi dips on ratings cut

By James McCandless

San Antonio, Jan. 22 – In the Wednesday distressed debt session, activity was largely centered on movers in the energy space.

McDermott International, Inc.’s notes inched higher in the aftermath of its bankruptcy news and the subsequent ratings downgrades.

As oil futures were weighed down, Oasis Petroleum Inc.’s and California Resources Corp.’s issues followed as Whiting Petroleum Corp.’s paper varied.

Elsewhere, automotive name Delphi Technologies plc’s notes dipped after receiving a ratings downgrade.

In the retail space, L Brands, Inc.’s issues diverged a day after an analyst upgrade while Rite Aid Corp.’s paper tracked upward.

Meanwhile, satellite name Intelsat SA’s paper saw mixed activity as it waits for regulators to set terms for a C-band auction.

Telecom-related real estate investment trust Uniti Group Inc.’s notes were under water.

McDermott higher

McDermott’s notes inched higher by the end of Wednesday activity, traders said.

The 10 5/8% senior notes due 2024 improved by ¼ point to close at 13 bid.

About $19 million of the notes were on the tape by the end of the session.

After announcing that it had majority support from creditors for a restructuring transaction, the Houston-based oil and gas engineering company filed for Chapter 11 bankruptcy late Tuesday, Prospect News reported.

The restructuring agreement would cut more than $4.6 billion of debt.

“They will probably emerge from the whole process in the summer, definitely by the end of the year,” a trader said.

Following the news, the name received ratings downgrades from S&P Global Ratings and Moody’s Investors Service.

S&P slashed its senior secured debt and senior unsecured notes ratings while Moody’s cut McDermott Technology (Americas), Inc.’s probability of default rating, corporate family rating and super-priority credit facilities rating, senior secured credit facilities rating and senior unsecured notes rating.

Oil trends down

As oil futures were weighed down, distressed energy names took a hit, market sources said.

Crude prices were depressed by expectations of a surplus in U.S. crude supplies.

West Texas Intermediate crude oil futures for March delivery dived $1.64 to settle at $56.74 per barrel.

North Sea Brent crude oil futures for March delivery finished at $63.21 per barrel following a $1.38 loss.

Houston-based independent oil and gas producer Oasis Petroleum’s issues followed futures downward.

The 6¼% senior notes due 2026 fell 2½ points to close at 80¾ bid.

Los Angeles-based producer California Resources’ paper moved with the sector trend.

The 6% senior paper due 2024 shed 2 points to close at 34 bid. The 8% senior secured notes due 2022 dropped 2½ points to close at 39¾ bid.

Denver-based peer Whiting Petroleum’s notes varied in direction.

The 6¼% senior notes due 2023 dipped 1 point to close at 81¼ bid. The 6 5/8% senior notes due 2026 gained ¾ point to close at 65¼ bid.

Delphi dips

Elsewhere, automotive name Delphi’s issues saw a dip, traders said.

The 5% senior notes due 2025 lost 1¾ points to close at 88½ bid.

By the end of the afternoon, $11 million of the notes had changed hands.

On Wednesday, Moody’s issued a series of ratings downgrades for the London-based automotive powertrain producer.

The agency lowered the corporate family rating, probability of default rating and senior unsecured note rating.

The downgrades reflect the agency’s belief that Delphi’s debt/EBITDA leverage will remain elevated in the intermediate term and the expectation of lower levels of profitability due to continued weakness in global automotive production.

Rite Aid up

In the retail space, L Brands’ paper diverged in direction, market sources said.

The 5¼% senior paper due 2028 picked up 1½ points to close at 97½ bid. The 6¾% senior notes due 2036 shed 1¼ points to close at 92¼ bid.

The Columbus, Ohio-based department store chain received an analyst upgrade from KeyBanc Capital Markets, which gave an overweight rating on the name.

The analysts said in a note that KeyBanc raised its rating on an increasingly likely value-creating transaction for L Brands’ Victoria’s Secret segment.

The brand has seen consistent quarter-by-quarter reductions in comparable-store sales.

Concurrently, analysts also expressed a positive view of a potential spinoff of its Bath & Body Works arm.

Camp Hill, Pa.-based drug store name Rite Aid’s notes tracked upward.

The 6 1/8% notes due 2023 added 1½ points to close at 90¼ bid.

Intelsat flat to lower

Meanwhile, telecom name Intelsat’s issues were mixed, traders said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 held level at 59 bid. The 9½% senior notes due 2023 shaved off ¾ point to close at 71½ bid.

The Luxembourg-based satellite operator and its peers, making up the C-Band Alliance, continue to wait for the Federal Communications Commission to hand down the rules for a potential spectrum auction.

The auction was made public late last year despite a sustained lobbying effort from satellite companies.

Little Rock, Ark.-based telecom-related real estate investment trust Uniti Group’s paper was under water.

The 8¼% senior paper due 2023 lost ½ point to close at 81½ bid. The 7 1/8% senior notes due 2024 dipped ½ point to close at 79½ bid.

© 2015 Prospect News.
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