Intelsat varies after satellite malfunction; PG&E lower following restructuring deal

By James McCandless

San Antonio, Jan. 24 – At the end of the week for the distressed debt market, the focus honed in on newsmakers in the telecom and utilities sectors.

Intelsat SA’s notes varied in direction after news broke of a broadcast satellite it operates malfunctioning in orbit.

Sector peer Frontier Communications Corp.’s issues also diverged in the aftermath of a ratings downgrade.

Meanwhile, in utilities, PG&E Corp.’s paper shifted lower after Thursday’s restructuring deal reached with creditors.

In oil and gas, McDermott International, Inc.’s notes rose for a fourth consecutive day as it gains access to interim financing for its bankruptcy process.

Losses for oil futures at the end of the week meant haircuts for EQT Corp.’s, California Resources Corp.’s and Whiting Petroleum Corp.’s issues.

Elsewhere, retailer Rite Aid Corp.’s paper improved despite a ratings downgrade surrounding tranches involved in an exchange offer.

Department store name L Brands, Inc.’s notes were mixed.

Intelsat varies

Intelsat’s notes saw varying movements by the end of Friday, traders said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 picked up 1¼ points to close at 57¼ bid. Intelsat Jackson Holdings SA’s 7¾% senior notes due 2025 held level at 91¾ bid.

Both tranches combined to see about $50 million changing hands by the end of the session.

After the close on Thursday, news broke that a broadcast satellite operated by the Luxembourg-based telecom may explode in orbit due to a malfunction.

DirecTV, which owns the satellite, said that it “suffered a major anomaly that resulted in significant and irreversible thermal damage to its batteries.”

“Every once in a while you see an incident like this that increases the name’s visibility,” a trader said.

The company has routinely placed among top traders, most recently as it waits for the Federal Communications Commission to provide guidance on a C-band spectrum auction.

Frontier diverges

Sector peer Frontier’s issues also diverged in direction, market sources said.

The 10½% senior notes due 2022 added ¾ point to close at 45 bid. The 11% senior notes due 2025 shaved off ¼ point to close at 45 bid.

This week, news broke that the Norwalk, Conn.-based wireline communications company is preparing for a possible bankruptcy filing in March, with executives recently meeting with creditors over a $356 million debt payment looming.

Reacting to the news and reports that Frontier has been in consultations with restructuring advisers, Fitch Ratings lowered Frontier’s issuer default ratings on Thursday.

Talk of a potential restructuring began in earnest after the company released third-quarter earnings results in November.

PG&E lower

Meanwhile, in utilities, PG&E’s paper shifted to lower ground, traders said.

The 6.05% bonds due 2034 dipped ½ point to close at 114½ bid.

By the end of the session, about $20 million of the paper was on the tape.

The move off of recent highs came two days after the San Francisco-based bankrupt electric utility struck a deal with a group of creditors that resolves disputes surrounding interest payments, make-whole payments and its debt structure moving forward.

“They rattled the tree and were able to get some more money out of the deal,” a trader said. “That’s what the whole process was about.”

Despite the agreement, California governor Gavin Newsom remains opposed to the company’s restructuring plan, arguing that it still falls short of state regulations.

A hearing that would address the governor’s concerns has been scheduled for Jan. 31.

McDermott rises

In oil and gas, McDermott’s notes saw a fourth consecutive rise, market sources said.

The 10 5/8% senior notes due 2024 picked up ¼ point to close at 14 bid.

The Houston-based bankrupt oil and gas engineering company obtained court approval to access $850 million of a proposed $2.81 billion of debtor-in-possession financing on an interim basis, Prospect News reported.

The company filed for Chapter 11 bankruptcy on Tuesday after it had attained support for a restructuring agreement from a majority of its creditors.

The plan aims to reduce its debt load by more than $4.6 billion.

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

Oil loses

End-of-week losses for oil futures resulted in haircuts for distressed energy names, traders said.

West Texas Intermediate crude oil futures for March delivery fell $1.40 to settle at $54.19 per barrel.

North Sea Brent crude oil futures for March delivery capped the week at $60.69 per barrel after a $1.35 drop.

Pittsburgh-based independent oil and gas producer EQT’s issues were weaker.

The 3.9% senior notes due 2027 shed 2 points to close at 81¼ bid.

Los Angeles-based peer California Resources’ paper followed the sector trend.

The 6% senior notes due 2024 declined by 2½ points to close at 30½ bid. The 8% senior secured paper due 2022 shed 1¾ points to close at 37¾ bid.

Denver-based producer Whiting Petroleum’s notes also saw negativity.

The 6¼% senior notes due 2023 lost 1½ points to close at 75½ bid. The 6 5/8% senior notes due 2026 fell 2¼ points to close at 59 bid.

Rite Aid up

Elsewhere, retailer Rite Aid’s issues improved, market sources said.

The 6 1/8% senior notes due 2023 garnered ¼ point to close at 91¼ bid.

The Camp Hill, Pa.-based drug store chain received a ratings downgrade for its existing notes in the midst of an exchange offer.

Fitch Ratings downgraded the 2023 notes and affirmed a stable outlook, citing continuing operational challenges, increased competition in its sector and capital structure sustainability.

Earlier in the week, the company said that early results of the exchange offer showed that $1,633,938,000 of the existing 2023 notes had been tendered for newly issued 7½% senior secured notes due 2025.

Columbus, Ohio-based department store chain L Brands’ paper was mixed.

The 6¾% senior paper due 2036 added ¼ point to close at 92 bid. The 5¼% senior notes due 2028 dipped ½ point to close at 97¼ bid.

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