U.S. Steel notes weaken after CFO departure; PG&E lower amid exclusivity termination

By James McCandless

San Antonio, Oct. 9 – Wednesday in the distressed debt market focused on a handful of names, including United States Steel Corp., which saw its chief financial officer resign, and PG&E Corp., where power outages and a court ruling fueled some selling.

Meanwhile, Bed Bath & Beyond, Inc.’s paper varied in the run-up to the company’s after-market announcement of a new chief executive officer.

As oil futures diverged, California Resources Corp.’s and Valaris plc’s notes pushed higher while McDermott International, Inc.’s issues trailed.

Meanwhile, in pharma, Teva Pharmaceutical Industries Ltd.’s and Endo International plc’s paper was mixed.

Elsewhere, telecom name Frontier Communications Corp.’s notes improved.

U.S. Steel negative

U.S. Steel’s notes were seen taking a negative turn on Wednesday, traders said.

The 6 7/8% senior notes due 2025 dipped ¼ point to close at 87½ bid. The 6¼% senior notes due 2026 fell 2 points to close at 80½ bid.

After the close on Tuesday, the Pittsburgh-based steel manufacturer announced that CFO Kevin Bradley would resign from his position.

Senior vice president Christine Breves is expected to assume the role.

The company also said that it would be instituting cost-cutting measures at the beginning of next year, with the expressed goal of saving around $200 million by 2022.

Recently, the company saw increased scrutiny after news broke that it had purchased a $700 million stake in competitor Big River Steel, holding on to the option of taking over the company within four years.

PG&E lower

Utilities name PG&E’s issues edged lower, market sources said.

The 6.05% notes due 2034 shaved off ¼ point to close at 109¾ bid.

The San Francisco-based bankrupt electric utility has seen a rash of negative headlines over the last few days as it prepares to temporarily cut power to around 500,000 homes and businesses in California.

The move serves as a precaution as the weather in the area increases chances of another wildfire.

“Cutting power temporarily is better than having to pay billions more down the road,” a trader said.

Amid the preparations to head off another wildfire, the company is embroiled in a dispute with various stakeholders over how much it should have to pay out to wildfire victims.

Under its proposed plan, PG&E would cap victim payouts at $8.4 billion while a group of creditors and others are arguing for $13.5 billion.

Late Wednesday, news broke that a bankruptcy judge had terminated the company’s exclusive right to put forward a restructuring plan, opening the door for the creditor proposal to gain traction.

Bed Bath varies

In the retail space, Bed Bath’s paper varied in direction, traders said.

The 5.165% senior paper due 2044 dipped ¼ point to close at 67¾ bid. The 4.915% senior notes due 2034 improved by 1¼ points to close at 73 bid.

As the Wednesday session came to a close, the Union, N.J.-based retailer announced the appointment of Mark Tritton as its new president and CEO.

Tritton was previously the chief merchandising officer at Target.

Last week, the company released a lukewarm second-quarter earnings report and promised a CEO appointment soon.

The previous CEO resigned after activist investors ramped up pressure on the company to improve performance.

Oil diverges

As oil futures diverged, distressed energy names trended positively, market sources said.

Oil prices saw different movements amid increased volatility in the Middle East and a rise in U.S. crude inventories.

West Texas Intermediate crude oil futures for November delivery fell 4 cents to settle at $52.59 per barrel.

North Sea Brent crude oil futures for December delivery finished at $58.32 after an 8 cent pickup.

Los Angeles-based independent oil and gas producer California Resources’ notes pushed higher.

The 6% senior notes due 2024 tacked on 2½ points to close at 33½ bid. The 8% senior secured notes due 2022 gained 1¼ points to close at 47¾ bid.

London-based contract driller Valaris’ issues also ended on better footing.

The 7¾% senior notes due 2026 improved by 1½ points to close at 54 bid. The 5.2% senior notes due 2025 rose 1¼ points to close at 52¼ bid.

Conversely, Houston-based oil and gas engineering company McDermott’s paper trailed.

The 10 5/8% senior paper due 2024 shed ¼ point to close at 17¾ bid.

Teva, Endo mixed

Meanwhile, in the pharma space, Teva’s notes were mixed, traders said.

The 2.2% senior notes due 2021 lost ¼ point to close at 92½ bid. The 3.15% senior paper due 2026 added ¼ point to close at 70¾ bid.

As the Petach Tikva, Israel-based drug producer and others explore ways to settle the bevy of legal cases against them over opioid-related claims, the model that companies are looking to copy continues to see complications.

News broke on Wednesday that Purdue Pharma is looking to settle Department of Justice inquiries before finalizing its blanket settlement.

Dublin-based generics maker Endo’s issues also saw differing activity.

The Par Pharmaceutical Cos. Inc. 7½% senior secured notes due 2027 added ¼ point to close at 92¼ bid. The 6% senior notes due 2023 lost ½ point to close at 60¼ bid.

Frontier improves

In telecom, Frontier’s paper improved by the close, market sources said.

The 10½% senior notes due 2022 garnered ¼ point to close at 48½ bid. The 11% senior paper due 2025 picked up ¼ point to close at 47½ bid.

The Norwalk, Conn.-based wireline communications name is expected to present a restructuring plan to creditors soon.

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