Valaris higher after contract, arbitration news; L Brands loses despite upgrade

By James McCandless

San Antonio, Jan. 3 – The Friday session in the distressed market was largely driven by the energy sector, where fresh turmoil spurred activity.

Valaris plc’s notes were tracking higher after this week’s announcement of new contracts and a multimillion-dollar arbitration payment.

As oil futures spiked on new conflict in the Middle East, California Resources Corp.’s, Whiting Petroleum Corp.’s and Chesapeake Energy Corp.’s issues followed suit.

Meanwhile, in retail, L Brands, Inc.’s paper lost ground despite receiving an analyst upgrade from Bank of America.

Sector peer Rite Aid Corp.’s notes were active but unchanged.

Utilities name PG&E Corp.’s issues were also flat, though continued to be active amid ongoing disputes with its creditors.

In the manufacturing space, United States Steel Corp.’s paper was under pressure.

Satellite operator Intelsat SA’s notes saw varied movements in the telecom sector.

Valaris higher

Valaris’ notes were seen tracking higher on Friday, traders said.

The 5.2% senior notes due 2025 gained 2¾ points to close at 57¾ bid. The 7¾% senior notes due 2026 picked up 3½ points to close at 61 bid.

This week, the London-based contract driller announced that it had been awarded contracts and received contract extensions totaling $100 million in its backlog.

Concurrently, the company also announced that it had received $200 million in an arbitration payment in cash from Samsung Heavy Industries over losses from a Brazilian drilling contract.

Last month, the name pushed back against a proposed shareholder meeting by stakeholder Luminus Management to pick new board members.

Oil spikes

As oil futures spiked, distressed energy names followed suit, market sources said.

News broke late Thursday that the United States killed Iranian general Qassem Soleimani, causing crude futures to jump as more turmoil threatened the region.

West Texas Intermediate crude oil futures for February delivery picked up $1.87 to settle at $63.05 per barrel.

North Sea Brent crude oil futures for March delivery finished at $68.60 per barrel after a $2.35 rise.

“A lot of over-levered energy names were big targets today,” a trader said.

Los Angeles-based independent oil and gas producer California Resources’ issues followed futures upward.

The 6% senior notes due 2024 rose 5 points to close at 41 bid. The 8% senior secured notes due 2022 tacked on 4 points to close at 49 bid.

Denver-based producer Whiting Petroleum’s paper improved.

The 6¼% senior paper due 2023 added 3½ points to close at 88¼ bid. The 6 5/8% senior paper due 2026 garnered 3¼ points to close at 72 bid.

Oklahoma City-based peer Chesapeake Energy’s notes moved the same way.

The 8% senior notes due 2025 improved by ¾ point to close at 60 bid. The 8% senior notes due 2027 picked up 2 points to close at 63 bid.

L Brands loses, Rite Aid flat

Meanwhile, in the retail space, L Brands’ issues lost ground, traders said.

The 5¼% senior notes due 2028 shaved off ¼ point to close at 95¼ bid. The 6¾% senior notes due 2036 dropped ¾ point to close at 88 bid.

The declines came for the Columbus, Ohio-based retailer’s structure despite Friday’s news that analysts at Bank of America had upgraded its common stock to buy from neutral, largely on the back of the performance of its Bath & Body Works segment.

The analysts do not expect its Victoria’s Secret arm to recover soon after showing persistent weakness in the last year, though a spinoff is thought possible.

Activist investors have been pushing for a turnaround in Victoria’s Secret in recent months, pushing for a spinoff if changes don’t end in positive results.

Rite Aid’s paper was active but unchanged.

The 6 1/8% senior paper due 2023 held level at 91¼ bid.

PG&E active, level

Utilities name PG&E’s notes were flat through the Friday session, market sources said.

The 6.05% notes due 2034 closed level at 105 bid.

The dispute between the San Francisco-based bankrupt electric utility and its creditors deepened on Thursday after an informal committee of unsecured creditors asked a bankruptcy court to vacate its orders approving the company’s restructuring support agreements with wildfire victims.

The group argues that the court approved a $13.5 billion settlement between the company and victims without taking into account its proposal for an all cash settlement, whereas PG&E offered half cash and half equity.

U.S. Steel down

Elsewhere, in the manufacturing space, U.S. Steel’s issues were under pressure, traders said.

The 6 7/8% senior notes due 2025 fell ½ point to close at 95¼ bid. The 6¼% senior notes due 2026 slid 1 point to close at 87¾ bid.

After its latest earnings report last month, the Pittsburgh-based steelmaker’s structure has seen increased scrutiny.

Along with posting a fourth-quarter loss, the company also said that it had cut its guidance, reduced its dividend, ended share buybacks and announced the idling of a plant in Michigan.

Intelsat varies

Satellite operator Intelsat’s paper moved in direction directions, but was mostly flat, market sources said.

Intelsat Jackson Holdings SA’s 5½% senior paper due 2023 lost ¼ point to close at 86¼ bid. The 9½% senior paper due 2023 inched up ¼ point to close at 71 bid.

The Luxembourg-based telecom name is facing the prospect of a public C-band spectrum auction that is expected to start at some point during the year.

After failing to convince regulators to hold a private auction and losing support from legislators on a fixed revenue plan, the task of setting terms for the auction now falls to the Federal Communications Commission.

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