Washington Prime bonds gain; Intelsat little traded; Transocean rallies; Peabody higher

By Cristal Cody

Tupelo, Miss., June 15 – Washington Prime Group, LP’s bonds saw additional gains on Tuesday in the distressed secondary market following the company’s Chapter 11 bankruptcy filing and downgrade by Fitch Ratings.

The issuer’s 6.45% notes due 2024 (C/D/CC) traded at the close up 2 points at 75 bid, a source said.

The notes were seen Monday in the 73½ bid range, up from the 64½ bid area on Friday.

Washington Prime Group Inc. announced on Monday that the company filed for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas on Sunday.

Fitch said Tuesday that it dropped the issuer’s default rating to D from RD, while upgrading its senior notes to CC from C.

The company plans to restructure its corporate-level debt, either through a full equitization of its unsecured notes or an alternative value-maximizing transaction that would repay in full in cash all of its corporate debt.

Washington Prime has secured a $100 million non-amortizing multiple draw super-priority senior secured debtor-in-possession term loan facility from the consenting creditors to support daily operations.

The company had been in a forbearance agreement since March 16 over a missed payment on its 6.45% notes.

The Columbus, Ohio-based shopping center real estate investment trust disclosed in February that its operating partnership withheld a $23.2 million interest payment that was due Feb. 15.

Intelsat Jackson quiet

Intelsat Jackson Holdings SA’s distressed bonds were quiet in the secondary market on Tuesday following the company’s report of an April net loss and the continuation of the parent company’s bankruptcy hearing, a source said.

The 5½% senior notes due 2023 were last seen in the same session a week ago trading at the 58 bid area.

The issue is down only about ¼ point since the end of May but has softened from the 67½ bid range at the start of the year.

Parent company Intelsat SA’s Chapter 11 bankruptcy statement hearing had been adjourned to Monday but was continued with no new hearing date yet scheduled, according to filings with the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, on Sunday and May 10.

The satellite operator announced in February that it reached a Chapter 11 bankruptcy restructuring plan that would reduce its debt to $7 billion from nearly $15 billion.

Intelsat filed for Chapter 11 bankruptcy on May 4, 2020.

The company reported in a bankruptcy court filing on Monday a $32.57 million net loss on revenue of $134.65 million for April.

Transocean higher

Energy bonds rallied as oil prices improved over the day.

North Sea Brent crude oil futures for August deliveries settled $1.13 higher at $73.99 a barrel.

West Texas intermediate crude oil benchmark futures for July deliveries rose $1.24 to settle at $72.12 a barrel, while August deliveries settled up $1.23 at $71.86 a barrel.

In distressed energy issues, Transocean Inc.’s bonds gained about 2 to 3 points over the day, a source said.

Transocean’s 7½% senior notes due 2026 (Ca/CCC) improved more than 2 points to 85 1/8 bid.

The Vernier, Switzerland-based offshore driller’s 7½% senior notes due 2031 (C/CCC-/) climbed about 3 points to the 68½ bid area on Tuesday.

Peabody modestly better

In other distressed energy issues, Peabody Energy Corp.’s 6 3/8% notes due 2025 (Caa1/CCC) rose to 75½ bid from 75 3/8 bid in light secondary trading during the session, a source said.

The notes traded Monday up ¼ point to 5/8 point after climbing nearly 14 points in the prior week.

The issue finished May in the 57¾ bid range and traded at the 54 bid area at the start of the year.

S&P Global Ratings upgraded the St. Louis-based coal producer’s ratings to CCC from SD earlier in June.

The ratings agency said the company’s outlook is negative, and it views Peabody’s recent trade of lower-priority common shares for its 6% senior notes due 2022 as a selective default.

Lower 2021 defaults eyed

Defaults among energy issuers are expected to fall to 7½% by the end of June and decline to around 5% by July before falling to a 2% year-end forecast, according to a June 10 Fitch Ratings report.

The May trailing 12-month default rate stood at 2.6% and is expected to fall to 2% by the end of June, while the trailing 12-month default rate is expected to dip as low as 1.3% by the end of July, according to the report.

Year-to-date default volume is down 88% compared with one year prior at just $4.4 billion, or 0.3% year to date, Fitch said.

Fitch lowered its year-end 2021 high-yield default rate forecast by half to 1%.

“The expected 1% year-end rate would be the lowest since 2013, and could challenge the ½% mark set in 2007, assuming the current strong environment continues,” Eric Rosenthal, senior director of leveraged finance, said in a news release. “The top market concern bonds total has declined for seven straight months to its lowest level since January 2019.”

Fitch said it expects several notable sector default rates to end the year at or below 1%, including health care/pharmaceutical, technology and retail.

Overall market tone was mixed as the Federal Reserve kicked off its two-day monetary policy meeting on Tuesday.

The iShares iBoxx High Yield Corporate Bond ETF edged down 1 cent to $87.53.

The S&P U.S. High Yield Corporate Distressed Bond index started the week down 0.29% on Monday. The index has month-to-date total returns of 2.23% and year-to-date total returns of 27.29%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.