Sanchez Energy down on bankruptcy; Neiman Marcus lower after lawsuit news

By James McCandless

San Antonio, Aug. 12 – The beginning of the week in the distressed market was marred by negative news surrounding volume leaders.

Sanchez Energy Corp.’s notes headed downward after the company announced that it had filed for Chapter 11 bankruptcy.

Despite improving oil futures, Southwestern Energy Co., Diamond Offshore Drilling, Inc. and Whiting Petroleum Corp.’s issues were under pressure.

Meanwhile, in retail, Neiman Marcus Group, Inc.’s paper traded lower after a bond trustee filed a lawsuit against the company over a private equity transfer.

Sector peer Rite Aid Corp.’s notes declined as the company installs a new chief executive officer.

In telecom, Frontier Communications Corp.’s issues were under water after a ratings downgrade.

Satellite operator Intelsat SA’s paper was also trailing.

Business software name Exela Technologies, Inc.’s notes underwent a partial rebound.

Sanchez bankrupt

Sanchez Energy’s notes were headed downward during the Monday session, a trader said.

The 6 1/8% senior notes due 2023 lost 2 points to close at 4 bid. The 7¼% notes due 2023 dropped 5¼ points to close at 68 bid.

On Monday, the Houston-based independent oil and gas producer filed for Chapter 11 bankruptcy after months of languishing over commodity prices and other factors contributing to a volatile sector.

The company said that it has received commitments from some of its senior lenders for $175 million in new financing, of which $25 million will be used to repay borrowings and replace a letter of credit currently outstanding under its existing revolving credit facility, Prospect News reported.

“Everything still needs to be worked out with its creditors,” a trader said. “I would say they exit bankruptcy in three to six months.”

After the filing, S&P Global Ratings lowered the company to D.

The company started a strategic alternatives review after a string of weak quarters.

Oil names dip

Elsewhere in oil and gas, futures and distressed tranches moved in opposite directions, market sources said.

Spring, Texas-based oil and gas producer Southwestern Energy’s issues were under pressure.

The 7½% senior notes due 2026 shaved off ¼ point to close at 83½ bid. The 6.2% notes due 2025 also slipped ¼ point to close at 84 bid.

The 7½% notes saw about $12 million trading.

Houston-based driller Diamond Offshore’s paper was similarly weaker by the close.

The 5.7% senior paper due 2039 lost ¼ point to close at 64 bid.

Denver-based peer Whiting Petroleum’s notes also went negative.

The 6¼% senior notes due 2023 dipped 1¾ points to close at 83¼ bid. The 6 5/8% notes due 2026 declined by 2 points to close at 80½ bid.

Despite global trade concerns, oil futures saw moderate gains.

West Texas Intermediate crude oil futures for September delivery added 43 cents to settle the day at $54.93 per barrel.

North Sea Brent crude oil futures fur October delivery finished the session at $58.57 per barrel after gaining 4 cents.

Neiman down

In retail, Neiman Marcus’ issues were pushed lower, traders said.

The 14% notes due 2024 fell 2¾ points to close at 69¾ bid.

News broke on Friday that a bond trustee of the Dallas-based luxury department store chain had filed a lawsuit against the company over the private equity transfer of e-commerce segment MyTheresa.

The suit filed by UMB Bank is the second of its kind against the company, which claims that the name was insolvent at the time of the transfer.

In March a court in Texas dismissed a similar case brought by Marble Ridge Capital.

“If they default, MyTheresa is harder to get to,” a trader said. “That’s bad for holders since its one of the more profitable parts of the business.”

Rite Aid dips

Sector peer Rite Aid’s paper saw a slight decline, market sources said.

The 6 1/8% senior paper due 2023 fell ¼ point to close at 81¾ bid.

On Monday morning, the Camp Hill, Penn.-based drug store retailer announced the appointment of health care executive Heyward Donigan as its new chief executive officer.

The company has been under increased scrutiny since August 2018, when a proposed merger with grocery giant Albertsons was nixed before coming to a shareholder vote.

Since then, sentiment has been mixed as quarterly earnings reports have been underwhelming and it faces stiff competition in its sector.

Frontier, Intelsat trail

Telecom name Frontier’s notes were under water, traders said.

The 10½% senior notes due 2022 lost 1¼ points to close at 51¾ bid. The 11% notes due 2025 drifted down 1 point to close at 49¼ bid.

Moody’s Investors Service issued downgrades for the Norwalk, Conn.-based wireline communications name on Monday.

The agency downgraded the company’s corporate family rating, probability of default rating and issue-level ratings.

Last week, Frontier reported a 98 cents per share profit for the second quarter, above analyst estimates of a 34 cents per share loss.

Luxembourg-based satellite operator Intelsat’s issues were also trailing.

The Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 dropped ½ point to close at 91½ bid. The Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 moved down 2½ points to close at 78¾ bid.

Exela up

Exela’s paper saw a partial recovery, market sources said.

The 10% senior secured paper due 2023 gained 4¾ points to close at 62¼ bid.

The 10% paper saw $27 million on the tape by the end of the session.

Last Thursday, the Irving, Texas-based business software provider reported a 22 cents per share loss, worse than the 5 cents per share loss predicted by analysts.

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