Windstream notes crash after legal battle lost; PHI issues drop as pressure mounts on maturity

By James McCandless

San Antonio, Feb. 19 – The short week in the distressed space started with focus moving to the telecom sector.

Windstream Holdings, Inc.’s notes crashed after the company lost a legal fight over whether it defaulted on its debt in 2015.

Sector peer Intelsat SA’s issues were also lower as the market anticipates its earnings report.

Meanwhile, in the energy space, PHI, Inc.’s paper dropped as it faces more pressure over a maturity that comes due next month.

Bristow Group, Inc., another helicopter name, saw its notes continue to bounce back from recent lows after a canceled acquisition.

Modest gains for oil futures spurred similar movement for California Resources Corp., Denbury Resources Inc. and Weatherford International plc’s issues.

In the medical space, Teva Pharmaceutical Industries Ltd.’s paper was mixed as the company announced that it expects better sales of its EpiPen by year’s end.

PG&E Corp.’s notes sprung after the company received a “buy” analyst rating from Citigroup.

Windstream crashes

Garnering the most attention Tuesday, Windstream’s notes crashed, traders said.

The 10½% notes due 2024 cratered 18½ points to close at 64½ bid. The 6 3/8% notes due 2023 dropped 6¾ points to close at 38¼ bid.

Late Friday, the Little Rock, Ark.-based rural telecom company announced that it had lost its legal battle against hedge fund Aurelius Capital Management, with the U.S. District Court for the Southern District of New York ruling that the company defaulted on its bonds after spinning off Uniti Group in 2015.

Judge Jesse Furman ruled that the Windstream Services unit breached covenants on its issued bonds, awarding Aurelius a $310 million judgment.

Windstream plans to appeal the decision.

“Nobody really expected this, least of all Windstream,” a trader said. “They’re probably going to file for bankruptcy within the next few weeks.”

The company also postponed the release of its fourth-quarter earnings, which was previously scheduled for Feb. 21.

Intelsat lower

Elsewhere in the telecom space, Intelsat’s issues were also moving lower, market sources said.

Intelsat Jackson Holdings SA’s 5½% notes due 2023 shaved off ¼ point to close at 90 ¼ bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 lost ¾ point to close at 82¼ bid.

The Luxembourg-based C-band satellite operator received more attention in anticipation of the company’s scheduled fourth-quarter earnings release on Wednesday morning.

“Whatever happens tomorrow, there’s still a lot of positive interest here,” a trader said. “Word is that the Sprint/T-Mobile merger might fall through and one of them might want to get into the C-band space.”

PHI drops

Elsewhere, in the energy sector, PHI’s paper dropped, traders said.

The 5¼% paper due 2019 shed 2¾ points to close at 66¼ bid.

As the Lafayette, La.-based offshore helicopter name’s 2019 notes are scheduled to mature next month, the company is facing increasing pressure to find a refinancing solution and to protect equity rights.

On Tuesday, one of the company’s largest holders of non-voting shares sent a letter to the company’s management to be more transparent about its negotiations with bondholders and to remember the interests of all stakeholders in said negotiations.

After the close, the company released a statement saying that it is making progress in evaluating a “wide range of various options” available.

It also said that it would not comment further until there is an update.

Houston-based sector peer Bristow Group’s maintained a positive trend.

The 6¼% notes due 2022 added 3¾ points to close at 23¾ bid. The 8¾% notes due 2023 picked up ½ point to close at 73 bid.

Last week, its notes fell precipitously after cancelling a $560 million acquisition of Columbia Helicopters.

Oil names up

A slight rise in oil futures provided room for distressed oil names to improve, market sources said.

Los Angeles-based independent oil and gas producer California Resources’ issues were better.

The 6% notes due 2024 gained ½ point to close at 68½ bid. The 8% notes due 2022 jumped up 2½ points to close at 82 bid.

Houston-based peer Denbury’s paper was also trading upward.

The 6 3/8% paper due 2021 added ¼ point to close at 83½ bid. The 5½% paper due 2022 rose 1¼ points to close at 75¾ bid.

Baar, Switzerland-based oilfield services provider Weatherford’s notes gained.

The 8¼% notes due 2023 picked up 1¼ points to close at 71 bid.

West Texas Intermediate crude oil futures for March delivery ended the session at $56.09 per barrel following a 50 cent rise.

Brent North Sea crude futures for April delivery rose 20 cents to $66.45 per barrel.

Teva mixed

Elsewhere, in the healthcare space, Teva’s issues ended mixed, traders said.

The 3.15% notes due 2026 went up ¾ point to close at 82¼ bid. The 4.1% notes due 2046 lost 1¼ points to close at 71¾ bid.

Early Tuesday, the Petach Tikva, Israel-based generic drug manufacturer announced that it expects its generic version of the EpiPen to account for 25% of the U.S. market by the end of 2019.

The announcement was highlighted as a part of the company’s effort to increase growth by 2020.

Last week, the company reported a 53 cents per share profit, a hair short of the 54 cents per share that analysts predicted.

PG&E better

PG&E’s paper finished Tuesday better, market sources said.

The 6.05% paper due 2034 added 2 points to close at 93 bid.

The San Francisco-based bankrupt electric utility was on the rise after Citigroup upgraded its stock to a “buy.”

The bank said that the move is in part based on the expectation that legislation crafted to prevent future wildfires will be passed in California in the near future.

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