PG&E better amid continuing creditor spat; U.S. Steel lower in manufacturing space

By James McCandless

San Antonio, Dec. 23 – The distressed debt market started a short week following developments in the utilities and manufacturing sectors.

PG&E Corp.’s notes ended the day better as a group of creditors offered wildfire victims all cash as a settlement.

Elsewhere, in manufacturing, United States Steel Corp.’s issues declined in the aftermath of announcing a guidance cut.

In the retail space, Rite Aid Corp.’s and Bed Bath & Beyond Inc.’s paper varied in direction.

As oil bounded upward, Antero Resources Corp.’s and Diamond Offshore Drilling, Inc.’s notes were lifted while Whiting Petroleum Corp.’s issues diverged.

Meanwhile, in telecom, Intelsat SA’s paper saw negative movements as Frontier Communications Corp.’s notes gained.

PG&E better

PG&E’s notes were in a better position by Monday’s end, traders said.

The 6.05% notes due 2034 picked up ½ point to close at 106½ bid.

After the close on Friday, a creditor group of the San Francisco-based bankrupt electric utility said that it was prepared to pay a $13.5 billion settlement to wildfire victims in cash up front.

The group, led by Elliott Management, said in a letter to California governor Gavin Newsom that their settlement prioritizes the victims.

Elliott also said that the deal addresses the governor’s concerns over a lack of increased state oversight on the utility.

In a similar deal reached last week, the company’s bankruptcy court-approved settlement would be paid half in cash and half in equity in a reorganized entity upon its emergence from bankruptcy.

“It looks like the creditors are going to oppose them at every turn until they emerge from bankruptcy,” a trader said.

U.S. Steel declines

Elsewhere, in the manufacturing space, U.S. Steel’s issues declined, market sources said.

The 6¼ senior notes due 2026 shed ½ point to close at 88 bid. The 6 7/8% senior notes due 2025 lost 1¾ points to close at 94¼ bid.

In the last two trading days, the Pittsburgh-based steelmaker’s structure has been under pressure after several announcements from the company invited market scrutiny on its near-term performance.

The company cut its fourth-quarter guidance, reduced its quarterly dividend to 1 cent per share from 5 cents per share, cancelled share buybacks and said it would idle a plant in the Detroit area that currently employs more than 1,500 workers.

On the international front, the Brazilian government announced on Friday that the U.S. would drop plans to impose tariffs on Brazilian steel.

Tariffs on steel products from Argentina are expected to move forward.

Rite Aid, Bed Bath vary

In the retail sector, Rite Aid’s paper varied in direction, traders said.

The 6 1/8% senior notes due 2023 added 1 point to close at 90 bid. The 7.7% senior paper dipped 1½ points to close at 73½ bid.

Last week, the Camp Hill, Pa.-based drug store chain surprised industry watchers with the earnings results for the third quarter.

The company reported a 54 cent profit per share, better than the expected 3 cents per share profit.

Revenues also beat expectations at $5.46 billion.

Following the report, S&P Global Ratings raised the ratings on its senior unsecured notes due 2027 and 2028 after a partial cash tender offer, though asserted that the company’s capital structure remains unsustainable.

Union, N.J.-based sector peer Bed Bath & Beyond’s long-term notes also closed weaker.

The 5.165% senior notes due 2044 fell 1 point to close at 71½ bid. The 4.915% senior notes due 2034 inched up ¼ point to close at 75½ bid.

Oil rises

As oil futures bounded upward, distressed energy names mostly followed, market sources said.

Crude futures rose after Russia said a petroleum producer group led by OPEC said that it may ease output in the new year.

West Texas Intermediate crude oil futures for February delivery rose 8 cents to settle at $60.52 per barrel.

North Sea Brent crude oil futures for February delivery ended at $66.39 per barrel after a 25 cent markup.

Denver-based independent oil and gas producer Antero Resources’ issues were lifted.

The 5 5/8% senior notes due 2023 improved by ¼ point to close at 82¾ bid. The 5% senior notes due 2025 garnered ¾ point to close at 75 bid.

Houston-based contract driller Diamond Offshore’s paper also tracked higher.

The 7 7/8% senior paper due 2025 rose ¾ point to close at 85¾ bid.

Denver-based producer Whiting Petroleum’s notes diverged.

The 6¼% senior notes due 2023 picked up 2023 added ¾ point to close at 84 bid. The 6 5/8% senior notes due 2026 dived 4¼ points to close at 63¼ bid.

Intelsat edges lower

Meanwhile, in telecom, Intelsat’s issues saw negative movements, traders said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 shaved off ¼ point to close at 60¼ bid. Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 lost ¼ point to close at 86 bid.

Last week, the Luxembourg-based satellite name saw increased negative attention after a bill that would have set the terms for a C-band spectrum auction lost support and failed to pass.

If it had passed, companies like Intelsat would’ve divvied up half of the proceeds from a potential auction with the rest going to the Treasury.

Setting the parameters for a 2020 auction now falls to the Federal Communications Commission.

Norwalk, Conn.-based wireline communications name Frontier’s paper gained.

The 10½% senior notes due 2022 tacked on 1½ points to close at 49¾ bid. The 11% senior paper due 2025 rose 2¼ points to close at 49½ bid.

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