Talen Energy unsecured notes strengthen; Wynn Macau, Studio City notes fall further

By Abigail W. Adams

Portland, Me., Sept. 16 – Volume was light in the distressed debt space on Thursday with the new issue calendar and the Jewish holiday detracting from trading activity.

However, there remained notable activity in some emerging market gaming names.

Wynn Macau Ltd.’s and Macau-based Studio City International Holdings Ltd.’s junk bonds continued to slide after Macau announced plans to increase oversight of gaming operators.

Meanwhile, Talen Energy Supply LLC’s unsecured notes were on the rise on Thursday as the company reviews options to handle its debt burden.

Under pressure

Macau-based gaming companies continued to see their junk bonds decline on Thursday following Macau’s promise to increase oversight of the sector.

After sliding 3 to 6 points on Wednesday, Wynn Macau’s junk bonds slid another 1 to 2 points during Thursday’s session.

Wynn Macau’s 5½% senior notes due January 2026 fell another 1¾ points to close the day at 95¼, according to a market source.

The 5½% senior notes due 2027 were also off 1¾ points to close the day at 94¼.

After falling almost 5 points the previous session, Studio City’s 5% senior notes due 2029 were down another 3½ points to close the day at 90, according to a market source.

The gaming sector, in general, has been under pressure since Macau announced its intention to increase supervision on Tuesday, a source said.

The announcement comes as China’s crackdown on the tech sector extends to other areas. Macau’s gaming operations have long been on China’s regulatory radar.

While the crackdown sparked a sell-off in the junk bonds of Macau’s casino operators, it may result in the companies diversifying into non-gaming attractions.

While the diversification may hurt short-term revenue growth, there may be long-term benefits for the companies’ fundamentals, a source said.

Talen gains

Talen Energy’s unsecured notes were on the rise in decent volume on Thursday as creditors and the company prepare for debt talks.

The 10½% senior notes due 2026 gained 2 points to close the day at 50½, according to a market source.

There was $6 million in reported volume.

The 6½% senior notes due 2025 rose 1 point to 47 with more than $7 million on the tape.

Talen’s creditors have retained legal counsel as the company reviews various financing and debt-reduction proposals to address its $4 billion debt load, Bloomberg reported.

Talen’s junk bonds have slowly recovered after plunging in mid-August following disappointing earnings and a S&P Global Ratings downgrade.

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