Rackspace lower after management shake-up; U.S. Steel down on weaker industry numbers

By James McCandless

San Antonio, July 9 – The Tuesday session in the distressed space saw a focus on energy and steel names.

Rackspace Hosting Inc.’s notes went on a lower path after the company announced a shake-up in management on Monday.

Meanwhile, U.S. Steel’s issues moved downward after week-to-week raw steel production was reported to be lower than the previous week.

Sector peer AK Steel Holding Corp.’s paper was mixed.

Despite rising oil futures, tranches for Superior Energy Services, Inc., Chesapeake Energy Corp. and Halcon Resources Corp.’s notes were trailing.

Elsewhere, in telecom, Frontier Communications Corp.’s and Intelsat SA’s issues declined.

Chemicals name Rayonier Advanced Materials Inc.’s paper slid.

Rackspace lower

Rackspace’s notes were on a lower path during Tuesday’s activity, traders said.

The 8 5/8% senior notes due 2024 lost 2½ points to close at 89 bid.

The notes saw about $23 million trading by the end of the day.

On Monday, the San Antonio-based cloud computing company announced the departures of its chief financial officer, chief operations officer and chief marketing officer.

The company said in s statement that it was in a period of “rapid transformation” that was instigated when chief executive officer Kevin Jones was installed in April.

It expects to name new people for the positions in the coming weeks.

The structure has been weaker over the last six months as the company retools its business, marked by hundreds of layoffs.

U.S. Steel down, AK Steel mixed

Meanwhile, U.S. Steel’s issues moved downward, market sources said.

The 6¼% senior notes due 2026 dropped 3¼ points to close at 88 bid.

$17 million was on the tape by the end of the afternoon.

The latest report from the American Iron and Steel Institute showed that last week’s raw steel production was lower than the previous week at 1,847,000 net tons.

It also indicated that American steel mills are operating at below 80% of their capacity.

“There’s a few things converging on the industry this week that are driving names like U.S. Steel lower,” a trader said.

On Monday, news coverage highlighting the perennial uncertainty in the trade climate weigh heavily on the structure.

West Chester, Ohio-based sector peer AK Steel’s paper was mixed.

The 7% senior notes due 2027 added ¼ point to close at 81½ bid. The 6 3/8% notes due 2025 dropped off 2 points to close at 82¼ bid.

Oil names lose

While oil futures rose, distressed energy tranches traded in the opposite direction, traders said.

Houston-based oilfield services provider Superior Energy’s notes trailed.

The 7 1/8% senior notes due 2021 lost 2½ points to close at 67½ bid. The 7¾% notes due 2024 fell 2 points to close at 64½ bid.

Oklahoma City, Okla.-based independent oil and gas producer Chesapeake Energy’s issues followed suit.

The 8% senior notes due 2027 dropped 1 point to close at 84½ bid.

Houston-based peer Halcon Resources’ paper was under water.

The 6¾% senior notes due 2025 traded down 3¾ points to close at 29¼ bid.

West Texas Intermediate crude oil futures for August delivery picked up 17 cents to close at $57.83 per barrel.

North Sea Brent crude oil futures for September delivery settled at $64.16 per barrel up on a gain of 5 cents.

Frontier, Intelsat declines

Elsewhere, in the telecom space, Frontier’s notes were negative, market sources said.

The 10½% senior notes due 2022 shed ¾ point to close at 66½ bid. The 11% notes due 2025 declined by 1 point to close at 61½ bid.

The market is waiting on the Norwalk, Conn.-based wireline communications name to make a decision on how to handle a 2022 maturity wall.

While it is reportedly considering bankruptcy, some stakeholders have argued that it would be better served making an out-of-court maneuver.

Luxembourg-based satellite operator Intelsat’s issues were also slipping.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 lost ¼ point to close at 91½ bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 fell 1¼ points to close at 77 bid.

Rayonier slides

Chemicals name Rayonier’s paper saw a slide, traders said.

The 5½% senior paper due 2024 dropped 3½ points to close at 81 bid.

The Jacksonville, Fla.-based diversified chemicals producer’s structure has seen significant weakness in the last few months after a disappointing first-quarter earnings report, which resulted in the paper falling from the 90’s context to the lower 80’s.

The company cited commodity prices in its cellulose, soft lumber and paperboard markets.

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