Bon-Ton issues active on rating downgrade; energy names trade heavily on lower oil futures

By James McCandless

San Antonio, Feb. 6 – Traders described Tuesday’s distressed debt trading as lax, with much of the volume coming from oil and gas companies and volume favorites.

Bon-Ton Stores, Inc. notes reversed Monday’s losses despite the company receiving another rating downgrade after the company declared Chapter 11 bankruptcy on Sunday.

Falling crude prices led to high volume activity in oil and gas notes, namely Northern Oil and Gas, Inc., Jones Energy, Inc., and Sanchez Energy Corp.

Revlon, Inc. issues traded heavily as it received another rating downgrade Tuesday, its second in a week after the company announced last Monday that its chief executive officer was leaving the company.

Telecom favorites Frontier Communications Corp. and Intelsat SA kept up their high volume activity. Mallinckrodt plc and Community Health Systems, Inc. continued their recent spikes in trading.

Bon-Ton downgraded

Noes in York, Pa.-based department store Bon-Ton Stores reversed Monday’s losses despite the company receiving a downgrade in its probability of default rating from Moody’s Investor Service. The company filed for Chapter 11 bankruptcy on Sunday, according to court filings, and is expected to start exploring selling the company or a portion of its assets. Reports confirmed late Monday that it had interim financing access granted in bankruptcy court in order to continue.

The 8% notes due 2021 rose about 5 points to close at 18¼ bid.

Energy names active

Market sources said that Tuesday’s decline in oil futures led to high volume trading in distressed energy names.

Minnetonka, Minn.-based independent oil and gas producer Northern Oil and Gas notes remained heavily traded, a market source said. Last week, the company announced a note exchange agreement that includes swapping a majority of its 8% notes due 2020 for new 2023 notes, raising new equity, and management changes.

Those notes rose ½ point to close at about 89 bid.

Paper in Austin, Texas-based oil and gas property owner Jones Energy fell sharply in the day’s trading. On Monday, reports confirmed that the company would make a $450 million offering of senior secured first lien notes due 2023, using the proceeds to reduce borrowings and debts. The 9¼% notes due 2023 dropped 9 points to close at 67 bid.

Issues in Houston-based independent oil and gas name Sanchez Energy notes fell with oil futures as the company announced a $400 million private offering of senior secured first lien notes due 2023. The 6 1/8% notes due 2023 fell 3 points to close at 82 bid.

Revlon downgraded

New York City-based cosmetic producer Revlon received a corporate credit rating downgrade from Standard & Poor’s Tuesday (see related story elsewhere in this issue). This is the company’s second downgrade in a week after last week’s departure of CEO Fabian Garcia. S&P affirmed a stable outlook as the company looks for ways to increase online sales, a trader said.

“They need to start gaining more online revenue quickly,” the trader said.

The 5¾% notes due 2021 dropped 2½ points to close around 78 bid. The 6¼% notes due 2024, though actively traded, finished at yesterday’s level of at 65¾ bid.

Volume regulars trade

Notes in the Norwalk, Conn.-based wireline telecom Frontier Communications traded down Tuesday, continuing to be traded in high volume on recent news about positive changes to its credit agreements. The 7 5/8% notes due 2024 fell 2¼ point to close at 63¾ bid. The 10½% notes due 2022 shaved off about a point to close at 82 5/8 bid. The 11% notes due 2025 dropped 1 point to end at 76½ bid.

Luxembourg-based satellite communications company Intelsat’s issues continued high volume trading. The Intelsat Jackson SA 7¼% issues due 2020 rose slightly to finish at 85½ bid.

Britain-based pharmaceutical name Mallinckrodt sustained a second day of heavy trading. The 4¾% notes due 2023 jumped about ¼ point to close at 79½ bid.

Issues in Franklin, Tenn.-based hospital owner Community Health Systems became a favorite name to trade again Tuesday. The 7 1/8% notes due 2020 gained about ¾ of a point to close at 87 bid. The 6 7/8% notes due 2022 rose ¼ point to close at 67¾ bid.

Other than usual names, a trader said that activity continued to remain low.

“There were a couple of people cherry-picking,” the trader said. “But they tried to low-ball stuff and didn’t wind up buying too much.”

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