Hexion up after note buyback announcement; CHC mixed on reorganization; hospitals and pharma down

By Colin Hanner

Chicago, Nov. 14 – After the extended holiday weekend, activity in distressed debt-land opened on Monday to stabilizing movement compared to last week’s volatile trends, which were due in part to the U.S. presidential election.

One trader said that the distressed market has been overlooked in the past few sessions, and especially Monday, because of a focus on higher-quality investments with interest-rate sensitivity given the high rate move that the market has seen in government bonds.

Quarterly earnings reports by chemical supplier Hexion Inc. brought about some movement in its senior secured notes after an announcement that the company would look to continue to buy back the debt at a discount if the opportunity arises.

CHC Group Ltd., a commercial helicopter operator, saw some movement stemming from the company’s reorganization and related disclosure statement, which will provide $300 million in new capital.

Movement in healthcare was quiet on the day. Community Health Systems Inc. and Quorum Health Corp. both dropped only marginally, and pharmaceutical company Pharmaceuticals International Inc. remained unchanged, if not slightly lower.

In the coal space, Peabody Energy Corp. continued its upward trek, while Murray Energy Corp. took a dive in the opposite direction.

Oil movement was mixed as focus on the Organization of Petroleum Exporting Countries came back into the limelight after speculation about president-elect Donald Trump’s energy plans seemed to influence the sector mid-to-late last week.

Geophysical services company CGG SA, which focuses mainly on oil and natural gas, saw an uptick, while distressed staples such as California Resources Corp. took a plunge amid such news.

Hexion buyback

Announcing third quarter results on Monday, Hexion Inc. said it will continue buying back its 8 7/8% notes due 2018 at a discount.

“We continued to look for opportunities to buy back the debt at a discount in the third quarter, dropping the balance from $1.2 billion where we started last year, third quarter down to $761 million,” executive vice president and chief financial officer George Knight said on the company’s Monday conference call announcing third quarter earnings. “So we’ll continue to look for opportunities on that front as they come available.”

Those notes saw some intraday fluctuation, trading as low as 93½ and as high as 97 2/8, where they settled, a market source said.

The notes were up more than 2½ points on the day.

Up in the air

On Friday, CHC Group Ltd. announced a plan of reorganization and related disclosure statement, which will provide $300 million in new capital from existing creditors in the form of a rights offering for new 3½-year second-lien convertible notes, as well as terms for restructured aircraft leases and the option for additional asset-based financing commitments of $150 million from Milestone Aviation Group Ltd. and its affiliates, according to a company news release.

Holders of 67.56% of the outstanding principal amount of CHC’s 9¼% senior secured notes due 2020, holders of 73.56% of the outstanding principal amount of the company’s 9 3/8% senior notes due 2021 and others support the plan.

Earlier in 2016, CHC completed the closure of a facility in Norco, La., which the company expects to be a $20 million annualized savings, $5 million of which was realized in the third quarter.

The 9¼% notes due 2020 were unchanged at 47¼, and the 9 3/8% notes due 2021 were up ½ point to 27½, a market source said.

Healthcare and pharma

After seeing reverse movement last week – pharmaceuticals on the upswing, while hospital groups on the downswing – movement hovered around less than 1 point for several names in the distressed arena.

“The hospital sector took a breather but still drifted,” a trader said.

According to data from Advantage Data Inc., health care (down 3.02%) had the worst showing of any significantly sized industry grouping for the week ending Nov. 11.

Community Health Systems Inc., which traded down nearly 10 points on several of its notes last week, saw only small movement in its 5 1/8% notes due 2021, which were down 3/8 point to 89 7/ 8, according to a trader.

“It seemed sideways today,” a trader said. “Not a lot of movement there.”

The 6 7/8% notes due 2022 were down 1/8 point to 67 3/8, and the 8% notes due 2019 were up ¼ point to 78, a market source said. A trader said the same notes were trading with a 67 handle.

Quorum Health Corp., a rebounder of 10 points during last Thursday’s trading, saw a ¾ point decrease in its 11 5/8% notes due 2023, a trader said.

“They were very quiet today,” a trader said.

In pharmaceuticals, Valeant Pharmaceuticals Corp. was unchanged in its 5 3/8% notes due 2020 at 85 3/8, a trader said.

Seeing slight downward movement were its 5 7/8% due 2023, which were down a ½ point to 77¼, and the 6 1/8% notes due 2025, which were down ¾ point to 77.

Coal and oil

Peabody Energy Corp. saw a 1-point uptick in its 6½% notes due 2020, which settled at 59, a trader said.

Its 10% notes due 2022 traded at 85, also a 1-point increase on the day.

Murray Energy Corp. was down almost a point to 76 1/8 on its 11¼% notes due 2021, a trader said, seeing its first movement since last Wednesday.

In oil, California Resources’ 8% notes due 2022 were down 1½ points to 68½ on “oil concerns,” a trader said.

West Texas Intermediate crude was up 31 cents, or 0.71%, to $43.72.

Brent crude was down 5 cents, or 0.11%, to $44.70.

Denbury Resources Corp. saw a 2-point decrease in its 6 3/8% notes due 2021, which were down to 78½, according to a market source.

Rounding out oil was MEG Energy Corp., which was down 2¼ points to 80¼.

Retailer go-round

Neiman-Marcus Group Inc.’s 8¾% notes due 2021 were down 3/8 point to 75 3/8, a trader said.

The company’s chief financial officer and executive vice president, Donald T. Grimes, resigned on Monday after 17 months with the retailer.

Seeing several-point increases were Nine West Co. and Rue21 Inc.

Nine West’s 8¼% notes due 2019 were up 2 points to 19 on one trade, a trader said, and Rue 21’s 9% notes due 2021 traded at 30, up 2½ points on the day.

Claire’s Inc.’s 9% notes due 2019 were down ½ point to 48¼, a market source said.

Round up

iHeartMedia Inc., or Clear Channel Communications Inc., saw a ¼-point decrease in its 9% notes due 2021, which traded at 71.

Intelsat SA’s Luxembourg-linked 8 1/8% notes due 2021 were down 5/8 point to 34, a trader said, and the same linked 7¾% notes due 2021 were up ¼ point to 34¼.

Caroline Salls contributed to this review.

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