Dean Foods lower after CFO departure; Diamond Offshore down amid ratings downgrade

By James McCandless

San Antonio, Sept. 25 – The distressed debt space spent Wednesday’s session with trading focused on newsmakers.

Dean Foods Co.’s notes moved lower after announcing that its chief financial officer has resigned.

In energy, Diamond Offshore Drilling, Inc.’s issues were headed downward after receiving a ratings downgrade.

Sector peer Valaris plc’s paper also declined on a downgrade of its ratings.

More losses for oil futures were mirrored in McDermott International, Inc.’s and Extraction Oil & Gas, Inc.’s notes.

Utilities name PG&E Corp.’s notes improved as it works through an argument over its reorganization with creditors.

Drug makers Teva Pharmaceutical Industries Ltd.’s and Endo International plc’s paper saw negativity.

The telecom space saw Frontier Communications Corp.’s notes vary in direction.

Dean Foods lower

Dean Foods’ notes were seen moving lower on Wednesday, traders said.

The 6½% senior notes due 2023 fell 3 points to close at 49 bid.

About $37 million of the notes were on the tape by the close.

After the close on Tuesday, the Dallas-based dairy products producer announced that CFO Jody Macedonio had resigned from her position effective immediately.

The company said that the departure was not related to any financial issues.

Senior vice president Gary Rahlfs has been appointed interim CFO until a permanent replacement can be named.

“I don’t think this will be too consequential in the short-term,” a trader said. “But they’ve been thought to be a candidate for a restructure for a while now.”

Recently, the company decided to enact an operational plan that did not include the sale of the company after a months-long strategic alternatives review.

Diamond declines

In energy, Diamond Offshore’s issues had a downward day, market sources said.

The 7 7/8% senior notes due 2025 dropped 6¼ points to close at 85¾ bid. The 5.2% senior notes due 2025 lost 1¾ points to close at 59½ bid.

On Wednesday, S&P Global Ratings issued a downgrade for the Houston-based contract driller.

The agency lowered its senior unsecured debt rating, citing weak operating margins that have the potential to persist for one to two years.

Valaris declines

Sector peer Valaris’ paper also declined, traders said.

The 5.2% senior notes due 2025 declined by 1¾ points to close at 59½ bid. The 7¾% senior notes due 2026 shed 2¾ points to close at 59 bid.

S&P said that it had downgraded the London-based driller’s issuer credit rating and senior unsecured debt rating.

The downgrades were in response to what S&P says is an unsustainable capital structure in the backdrop of a “slower-than-expected recovery in the offshore contract drilling industry.”

Oil futures down

Amid oil futures losses, distressed energy tranches followed, market sources said.

Futures were pushed under after an unexpected rise in U.S. crude inventories was reported.

West Texas Intermediate crude oil futures for November delivery dipped 80 cents, ending the day at $56.49 per barrel.

North Sea Brent crude oil futures for November delivery settled at $62.39 per barrel after a 71 cent loss.

Houston-based oil and gas engineering name McDermott’s notes were under water.

The 10 5/8% senior notes due 2024 shifted lower by 1¾ points to close at 26 bid.

Denver-based independent oil and gas producer Extraction Oil & Gas’ issues joined the sector’s trend.

The 5 5/8% senior notes due 2026 dropped 3¾ points to close at 63½ bid. The 7 3/8% senior notes due 2024 shed 3 points to close at 68 bid.

PG&E improves

Utilities name PG&E’s paper improved, traders said.

The 6.05% bonds due 2034 gained 1 point to close at 113½ bid.

The San Francisco-based bankrupt electric utility’s dispute with creditors over competing restructuring plans has shaken it in recent days.

The company has proposed capping payouts to wildfire victims at $8.4 billion, while a group composed of creditors and wildfire victims is pushing for a $24 billion settlement.

In a bankruptcy court hearing on Tuesday, a lawyer representing wildfire victims said that the company ignored them as it developed its restructuring plan.

A judge will decide whether the company holds onto its exclusive right to a restructuring plan in a hearing next month.

Teva, Endo negative

Generic drug maker Teva’s notes saw negativity, market sources said.

The 2.2% senior notes due 2021 fell 1 point to close at 91¾ bid. The 2.8% senior notes due 2028 lost 1¼ points to close at 81½ bid.

The pressure has remained constant on the Petach Tikva, Israel-based drug producer’s structure as lawsuits pile up against it and others in the sector over opioid-related claims.

Dublin-based peer Endo’s issues were also declining.

The 6% senior notes due 2023 shaved off ¼ point to close at 61¾ bid. The 6% senior notes due 2025 moved lower by ½ point to close at 58½ bid.

Frontier active

Telecom name Frontier’s paper varied in direction, traders said.

The 10½% senior notes due 2022 declined by ¾ point to close at 47¼ bid. The 11% senior notes due 2025 added ½ point to close at 47 bid.

The Norwalk, Conn.-based wireline communications name has indicated to creditors that it will present a reorganization plan soon.

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