U.S. Steel mixed after ratings downgrade; PG&E notes lower on bankruptcy development

By James McCandless

San Antonio, Sept. 4 – The Wednesday session in the distressed debt space focused on newsmakers as popular tranches generally moved lower.

United States Steel Corp.’s notes saw varying movements as it received downgrades and analyst cuts.

Meanwhile, PG&E Corp.’s issues declined after a bankruptcy court denied the company’s push for a key employee incentive plan.

Despite a ratings upgrade for a subsidiary, Navios Maritime Holdings Inc.’s paper continued to move lower.

In telecom, Intelsat SA’s notes recovered somewhat from previous losses stemming from a fracture in a group concerned with U.S. C-band usage.

Sector peer Frontier Communications Corp.’s issues trended lower.

Oil futures improved, followed by Extraction Oil & Gas, Inc.’s paper while Chesapeake Energy Corp.’s and Whiting Petroleum Corp.’s notes saw mixed movements.

Pharma name Teva Pharmaceutical Industries Ltd.’s issues skewed positive.

U.S. Steel varies

U.S. Steel’s notes saw varying movements in Wednesday’s session, traders said.

The 6.65% senior notes due 2037 dropped 6 points to close at 79 bid. The 6¼% senior notes due 2026 improved by ¾ point to close at 88¾ bid.

On Monday, Moody’s Investors Service issued downgrades for the Pittsburgh-based steel manufacturer.

The agency lowered the company’s corporate family rating, probability of default rating and senior unsecured ratings.

On Wednesday, Moody’s said that the downgrade is reflective of several factors, notably the expected weakening of debt protection metrics as steel prices decline and lower demand in key markets.

Concurrently, an analyst at Bank of America cut the forecast for U.S. steel prices and lowered earnings expectations for the name and other steelmakers.

The analyst cut earnings expectations for U.S. Steel to 75 cents from 79 cents.

“As long as trade is as uncertain as it is, names like U.S. Steel are going to pay a price,” a trader said.

The company’s structure has been volatile as the global steel market became rife with tariffs and increasing competition.

PG&E declines

Meanwhile, in utilities, PG&E’s issues declined, market sources said.

The 6.05% notes due 2034 shaved off ¼ point to close at 108 bid.

Late Friday, motion for approval of a key employee incentive plan was denied in bankruptcy court, Prospect News reported.

PG&E said in the motion filed in June that the program would pay incentive-based compensation to participants based on near-term safety, operational and financial goals.

The judge in the case said that the plan did not appear to be incentivizing enough.

As the sole entity with the right to do so, the company plans to submit a restructuring plan in bankruptcy court by the end of September.

Navios lower

Shipping name Navios’ paper continued to move lower, traders said.

The 7 3/8% secured paper due 2022 fell 1 point to close at 65 bid.

On Tuesday, the 7 3/8% paper moved down ½ point.

S&P Global Ratings upgraded the senior secured debt of Navios Midstream Partners LP, a subsidiary of the Monaco-based shipping company, on Wednesday.

The name announced last week that it had completed the sale of its ship management division to N Shipmanagement Acquisition Corp for $20 million.

The company will retain some involvement in a five-year service agreement with NSAC for technical and commercial management services.

Intelsat better

Elsewhere, in telecom, Intelsat’s notes saw a modest recovery, market sources said.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 edged up ¼ point to close at 90¾ bid. Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 gained ¼ point to close at 77¼ bid.

The Luxembourg-based satellite operator’s structure was under pressure on Tuesday after a member of the C-Band Alliance announced its separation from the group.

Paris-based Eutelsat’s chief executive recently said that the member companies were not in agreement on several key points.

Eutelsat said that it would remain committed to working with the U.S. government to get a fair deal on who could use c-band spectrum and who would receive the potential profits generated.

Norwalk, Conn.-based wireline communications name Frontier’s issues saw an upward trend.

The 10½% senior notes due 2021, while pushing up to 51½ bid during the day, closed level at 50½ bid. The 11% senior notes due 2025 dipped 1 point to close at 49½ bid.

Oil names mixed

As crude oil futures improved, many distressed energy tranches also rose, traders said.

Denver-based independent oil and gas producer Extraction Oil & Gas’ paper followed the sector trend.

The 5 5/8% senior paper due 2026 added 2 points to close at 69 bid.

Late Wednesday, the company said that its chief executive officer, Russell Kelley, would resign effective Sept. 15.

Oklahoma City-based oil and gas producer Chesapeake Energy’s notes saw mixed movements.

The 8% senior notes due 2027 shaved off ¾ point to close at 70¼ bid. The 8% senior notes due 2025 rose ¾ point to close at 75¾ bid.

Denver-based peer Whiting Petroleum’s issues also diverged in direction.

The 6¼% senior notes due 2023 lost 1¼ points to close at 76¾ bid. The 6 5/8% senior notes due 2026 tacked on 1 point to close at 70½ bid.

Crude oil futures rode a wave of positive economic data from China and an unexpected build of U.S. crude inventories.

West Texas Intermediate crude oil futures for October delivery jumped up $2.32 to close at $56.26 per barrel.

North Sea Brent crude oil futures for November delivery improved to $60.70 per barrel after a $2.44 increase.

Teva positive

Pharma name Teva’s paper saw a positive skew, market sources said.

The 2.2% senior paper due 2021 gained ¼ point to close at 94 bid. The 2.8% senior paper due 2028, while moving up to 85 bid during the session, finished level at 84 bid.

The Petach Tikva, Israel-based generic drug producer and its industry remain under pressure as lawsuits spring up across the country against producers of opioid drugs.

© 2015 Prospect News.
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