PG&E up amid state probe results; McDermott higher despite ratings downgrade

By James McCandless

San Antonio, Dec. 3 – The distressed debt market put its focus into names in the utilities and energy sectors.

PG&E Corp.’s notes moved up as a California report stated that the company did not do all it could to prevent recent wildfires.

Meanwhile, in energy, McDermott International, Inc.’s issues ended higher despite receiving a ratings downgrade.

A day of mixed oil futures was mirrored by Valaris plc’s paper while Chesapeake Energy Corp.’s notes gained and Whiting Petroleum Corp.’s issues declined.

Dairy name Dean Foods Co.’s paper fell as the company seeks bankruptcy court approval for a proposed asset sale.

In the telecom space, Frontier Communications Corp.’s notes diverged prior to announcing a new chief executive officer.

Sector peer Intelsat SA’s issues were under pressure.

Manufacturing name United States Steel Corp.’s paper traded to better levels.

PG&E notes better

PG&E’s notes were seen moving up on Tuesday, traders said.

The 6.05% notes due 2034 added ¼ point to close at 106 bid.

On Tuesday, California state investigators said that the San Francisco-based bankrupt electric utility failed to maintain and inspect its transmission systems properly, which led to the ignition of a large-scale wildfire last year.

The fire was the proverbial straw that broke the company’s back, filing for bankruptcy early in 2019 with an estimated $30 billion in potential liabilities.

The investigators went on to say that the utility exhibited a pattern of inadequate inspection and maintenance practices.

PG&E said that it accepts the report’s conclusions.

It also recently said that any fires it may have caused in 2019 did not lead to loss of life or structures.

McDermott higher

Meanwhile, in energy, McDermott’s issues ended higher, market sources said.

The 10 5/8% senior notes due 2024 tacked on ¼ point to close at 7¾ bid.

Early in the Tuesday session, S&P Global Ratings issued a downgrade for the Houston-based oil and gas engineering company.

The agency lowered its overall rating to SD from CC and the rating on its notes to D from C.

S&P said that the downgrade reflects the company’s Nov. 1 decision to skip an interest payment and enter into a forbearance agreement with approximately 35% of the senior unsecured noteholders until Jan. 15, 2020.

Talks with other creditors to join the agreement are ongoing.

The agreement grants the company access to a $250 million term loan and a $100 million letter-of-credit facility under a term B tranche.

Oil names mixed

Mixed movements in oil futures were mirrored in distressed energy names, traders said.

West Texas Intermediate crude oil futures for January delivery inched up 14 cents to settle at $56.10 per barrel.

North Sea Brent crude oil futures for February delivery finished at $60.82 per barrel after a 10 cent loss.

London-based contract driller Valaris’ paper moved in different directions.

The 5.2% senior notes due 2025 gained 1¼ points to close at 46½ bid. The 7¾% senior paper due 2026 dipped 1 point to close at 45¼ bid.

Oklahoma City-based independent oil and gas producer Chesapeake Energy’s notes gained.

The 8% senior notes due 2025 improved by 3¼ points to close at 51¾ bid. The 8% senior notes due 2027 garnered 1¼ points to close at 48 bid.

Denver-based producer Whiting Petroleum’s issues declined.

The 6¼% senior notes due 2023 dipped 1½ points to close at 66½ bid. The 6 5/8% senior notes due 2026 shed 1 point to close at 55¾ bid.

Dean Foods falls

Dairy name Dean Foods’ paper fell, market sources said.

The 6½% senior notes due 2023 shaved off ¾ point to close at 18½ bid.

Last week, the Dallas-based dairy products producer requested court approval to sell non-core assets under three separate assets purchase agreements, Prospect News reported.

The company says that the sales were marketed before its bankruptcy filing early last month.

Amid weak sales and increasing competition from non-traditional milk, the company reported a string of underperforming earnings before filing.

Frontier diverges

In the telecom space, Frontier’s notes diverged, traders said.

The 10½% senior notes due 2022 lost ¼ point to close at 45¾ bid. The 11% senior notes due 2025 improved by ¼ point to close at 46 bid.

The Norwalk, Conn.-based wireline communications name’s structure was active throughout the Tuesday session before the company announced an executive change after the close.

Frontier announced that it had appointed Bernie Han as president and CEO effective immediately, replacing Daniel McCarthy.

McCarthy is also resigning his position on the board of directors.

Han was most recently executive vice president of strategic planning at DISH Network.

Luxembourg-based satellite operator Intelsat’s issues were under pressure.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 slipped ¼ point to close at 45¼ bid. The 9½% senior notes due 2023 moved down 1¼ points to close at 57 bid.

U.S. Steel better

Manufacturing name U.S. Steel’s paper moved into better positions, market sources said.

The 6.65% senior notes due 2037 picked up 2 points to close at 80½ bid. The 6¼% senior paper due 2026 added 1¼ points to close at 88½ bid.

The Pittsburgh-based steelmaker’s paper has seen varying movements in the last few trading days after president Donald Trump announced that he was reviving tariffs on steel products imported from Argentina and Brazil.

The tariffs go into effect immediately.

The industry was also rocked by news on Tuesday after news broke that sector peer AK Steel accepted a $1.1 billion buyout from Cleveland-Cliffs.

© 2015 Prospect News.
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