EP Energy notes better after bankruptcy filing; PG&E declines amid financing update

By James McCandless

San Antonio, Oct. 4 – The distressed debt market ended the week with a renewed focus on energy names and newsmakers.

EP Energy Corp.’s notes moved higher after the company filed for Chapter 11 bankruptcy with a restructuring plan in place.

Sector peer Whiting Petroleum Corp.’s issues rose with oil futures as McDermott International, Inc.’s and Chesapeake Energy Corp.’s paper dipped.

Utilities name PG&E Corp.’s notes declined amid news that the company has received $34.35 billion in debt financing commitments.

Meanwhile, Exela Technologies, Inc.’s issues spiked after announcing that it was selected for a government contract worth up to $900 million.

Drug store name Rite Aid Corp.’s paper continued to rise a day after appointing a new chief operating officer.

Ending a tumultuous week, Teva Pharmaceutical Industries Ltd.’s notes gained ground while Mallinckrodt plc’s issues saw a negative shift.

EP Energy higher

EP Energy’s notes were moving higher throughout the day, traders said.

The 8% senior secured notes due 2024 jumped up 12½ points to close at 50 bid. The 7¾% senior secured notes due 2026 gained 3½ points to close at 79 bid.

On Friday, the Houston-based independent oil and gas producer became another of its kind to file for Chapter 11 bankruptcy.

Backed by private equity firms Apollo Global Management Inc. and Elliott Management Corp., the company said that it has a restructuring plan that would cut $3.3 billion of its debt load, about two thirds of its total.

The plan would convert Apollo and Elliott’s 70% stake in the company’s notes into 99% of the equity in the reorganized company.

Unsecured noteholders objected to the plan in bankruptcy court on Friday.

“It’s the same story it’s been all year,” a trader said. “Weak oil prices and too much debt. But they have the backing to reemerge relatively quickly.”

Oil names vary

As oil futures saw positive movement, distressed energy names varied, market sources said.

West Texas Intermediate crude oil futures for November delivery picked up 36 cents to settle Friday at $52.81 per barrel.

North Sea Brent crude oil futures for December delivery finished at $58.37 per barrel after a 66 cent pickup.

Denver-based oil and gas producer Whiting Petroleum’s issues also saw a rise.

The 6¼% senior notes due 2023 rose ½ point to close at 75½ bid. The 6 5/8% senior notes due 2026 improved by 1 point to close at 65½ bid.

On the other side of the spectrum, Houston-based oil and gas engineering name McDermott’s paper slid.

The 10 5/8% senior notes due 2024 dropped 1 point to close at 17½ bid.

Oklahoma City-based sector peer Chesapeake Energy’s notes also dipped.

The 8% senior notes due 2025 shaved off ¼ point to close at 71½ bid. The 8% senior notes due 2027 fell ¾ point to close at 68¼ bid.

PG&E declines

In utilities, PG&E’s issues were in decline, traders said.

The 6.05% notes due 2034 gave back 2½ points to close at 111 bid.

On Friday, the San Francisco-based bankrupt electric utility said that it had received $34.35 billion in debt financing commitments for its reorganization plan.

In a filing in bankruptcy court, the company said that the money comes from leading banks and that the terms are better than what a group of stakeholders are pushing for in a competing plan.

This week, a group of various stakeholders pushed a bankruptcy judge to terminate the company’s exclusive right to propose a restructuring, arguing that competition between plans would lead to a more favorable outcome.

The judge will render a decision on the matter later in the month.

Exela up

Meanwhile, Exela’s paper spiked upward on Friday, market sources said.

The 10% senior secured paper due 2023 shot up 6¼ points to close at 55¼ bid.

On Friday morning, the Irving, Tex.-based business software name announced that, in a joint bid with General Dynamics, it had been awarded a five-year contract with the Department of Veterans Affairs that could be worth as much as $900 million.

The award is to fund the expansion of Exela’s work with processing veteran benefits claims and other software.

Rite Aid rises

Retailer name Rite Aid’s notes sustained a rise at the end of the week, traders said.

The 6 1/8% senior notes due 2023 gained ¾ point to close at 80½ bid.

The Camp Hill, Pa.-based drug store chain’s structure has seen positivity over the last two trading days after news broke that the company had appointed a new chief operating officer.

The company’s recent earnings reports have been underwhelming as its industry weakens and competition gets tighter.

Teva gains

Elsewhere, in pharma, Teva’s issues gained ground, market sources said.

The 3.15% senior notes due 2026 garnered 1 point to close at 70¾ bid. The 2.8% senior notes due 2023 added ¾ point to close at 82 bid.

This week proved to be another tumultuous one for the Petach Tikva, Israel-based generic drug producer and others in its industry.

After peer Johnson & Johnson announced a settlement with two counties in Ohio over opioid-related claims, more attention was given to who would pay the next large settlement and how much it would be.

Teva has previously said that it has set aside $646 million for that reason.

Some pharma names are looking to use Purdue Pharma’s blanket settlement as a model for future settlements while some are advocating for joining the settlement in an attempt to reduce the overall burden.

Staines-upon-Thames, England-based drug maker Mallinckrodt’s paper moved downward.

The 5¾% senior paper due 2022 declined by 1¼ points to close at 32 bid. The 5 5/8% senior paper due 2023 fell 2½ points to close at 28 bid.

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