PG&E notes trade higher despite wildfire pressure; California Resources paper improves

By James McCandless

San Antonio, Nov. 4 – The distressed debt space began a new week with a continued focus on utilities and energy names.

PG&E Corp.’s notes moved higher despite more pressure concerning its role in recent wildfires in California.

Meanwhile, in oil and gas, California Resources Corp.’s issues gained in the wake of its third-quarter earnings release.

As oil futures trended upward, Antero Resources Corp.’s and Whiting Petroleum Corp.’s paper improved as McDermott International, Inc.’s notes trailed.

Hospital operator Community Health Systems, Inc.’s issues varied as the company priced a new tranche.

Elsewhere, steelmaker United States Steel Corp.’s paper diverged in the aftermath of its third-quarter report.

In car parts, Delphi Technologies plc’s notes continued to rise.

Telecom name Frontier Communications Corp.’s issues saw mixed activity.

PG&E higher

PG&E’s notes were moving higher at the beginning of the week, traders said.

The 6.05% notes due 2034 improved by 2 points to close at 104 bid.

About $27 million of the notes traded.

On Monday, a federal judge has ordered the San Francisco-based bankrupt electric utility to answer questions on the possibility that its faulty equipment sparked the latest wildfire plaguing northern California.

The company said that it would respond to the judge’s questions by Nov. 29.

As new wildfires persist, the utility is facing increasing pressure, with California governor Gavin Newsom threatening a government takeover if it cannot reach a restructuring deal soon.

“If he’s serious, then that might speed up the timeline for a deal to be reached between the bondholders and shareholders,” a trader said.

Currently, the two groups are at an impasse, having been ordered by a bankruptcy judge to enter mediation.

California Resources gains

Meanwhile, in the oil and gas space, California Resources’ issues gained, market sources said.

The 6% senior notes due 2024 rose 2¾ points to close at 29 bid. The 8% senior secured notes due 2022 picked up 2¼ points to close at 43¾ bid.

The Los Angeles-based independent oil and gas producer’s structure has been improving since the release of its third-quarter earnings late Thursday.

The company showed a profit of 35 cents per share, better than the 37 cents per share loss that analysts had expected.

Revenues were pegged at $681 million.

“I think what drove trading the most today was earnings in this sector,” a trader said.

Oil trends upward

Oil futures took an upward trend, with many distressed energy tranches also rising, traders said.

A combination of optimism about a trade deal between the United States and China and the prospect of an initial public offering from Saudi Aramco sent futures up.

West Texas Intermediate crude oil futures for December delivery gained 34 cents to settle the day at $56.54 per barrel.

North Sea Brent crude oil futures for January delivery finished at $62.13 per barrel after a 44 cent rise.

Denver-based producer Antero Resources’ paper trended upward.

The 5 1/8% senior notes due 2022 saw a 5-point boost to close at 84½ bid. The 5 5/8% senior paper due 2023 gained 3¾ points to close at 77¾ bid.

Whiting Petroleum, another Denver-based producer, saw its notes trade better.

The 6¼% senior notes due 2023 tacked on 2½ points to close at 78 bid. The 6 5/8% senior notes due 2026 gained 2¾ points to close at 67¾ bid.

Houston-based oil and gas engineering name McDermott’s issues trailed.

The 10 5/8% senior notes due 2024 dived 5½ points to close at 13½ bid.

Community Health varies

Health care name Community Health’s paper varied in direction, market sources said.

The 6 7/8% senior notes due 2022 shaved off ¼ point to close at 76 bid. The 8 1/8% senior secured paper due 2024 held level at 77½ bid.

Late Monday, the Franklin, Tenn.-based hospital operator priced a $500 million add-on to its 8% senior secured notes due March 15, 2026 at par to yield 8% in a quick-to-market Monday trade, Prospect News reported.

The company plans to use the proceeds to redeem all $121 million of its 2020 notes at par plus accrued interest.

U.S. Steel diverges

Elsewhere, steelmaker U.S. Steel’s notes diverged, traders said.

The 6¼% senior notes due 2026 improved by 1¼ points to close at 88½ bid. The 6.65% senior notes due 2037 lost 1 point to close at 76 bid.

Late last week, the Pittsburgh-based steelmaker reported a loss of 21 cents per share, better than the expected 29 cents per share loss.

Revenues were also better than expected at $3.069 billion.

Delphi rises

In car parts, Delphi’s issues continued rising, market sources said.

The 5% senior notes due 2025 picked up ½ point to close at 88½ bid.

The London-based car parts maker showed a 56 cents per share profit for the third quarter, meeting analyst predictions.

It concurrently announced the closure of a facility in Rochester, N.Y.

Frontier mixed

Telecom name Frontier’s paper saw mixed activity, traders said.

The 10½% senior notes due 2022 finished level at 47¼ bid. The 11% senior paper gained ½ point to close at 47½ bid.

The Norwalk, Conn.-based wireline communications company is facing a public call to file for bankruptcy from Discovery Capital Management, a hedge fund representing some major holders.

The fund argues that access to capital and investor confidence would erode if the company delays filing any further.

Restructuring talks are expected to start with creditors soon.

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