Distressed energy bonds down as crude oil prices slide; Transocean, Talen trade lower

By Cristal Cody

Tupelo, Miss., July 5 – Distressed energy bonds mostly softened on Tuesday as oil prices sank amid lower demand over the Independence Day holiday weekend.

Transocean Inc.’s bonds went out flat to weaker on Tuesday in thin trading after shedding about 10 points in June.

The offshore driller’s 6.8% senior notes due 2038 (C/CCC) declined about 2¾ points in the first post-holiday trading session.

Talen Energy Supply LLC’s bonds were mostly softer but have bounced back from lows seen ahead of the company’s Chapter 11 bankruptcy filing.

Talen Energy’s 6½% senior notes due 2025 (/D/C) were down about 1 point over the day but trading at nearly triple the handle hit in March.

Oil prices declined more than $8 during the post-holiday session.

West Texas Intermediate crude oil benchmark futures for August deliveries slid $8.93 to settle Tuesday at $99.50 a barrel.

North Sea Brent crude oil futures for September deliveries settled $8.86 lower at $102.77 a barrel.

The Federal Reserve Bank of New York said Tuesday in its weekly oil price market report that oil prices fell over the past week as demand expectations declined and anticipated supply remained broadly unchanged.

Stocks ended the session mixed, while market volatility was marginally higher and oil prices sank.

The iShares iBoxx High Yield Corporate Bond ETF fell 0.07% to $73.93.

The Chicago Board Options Exchange’s CBOE Volatility index edged up 0.29% to 27.61.

In other distressed bonds, Endo International plc’s paper was mostly unchanged in light trading action on Tuesday.

The 6% senior notes due 2028 (Caa3/C) have been flat over the last two sessions since the company missed a $38 million interest payment on the issue last week.

Transocean mostly weaker

Transocean’s paper was mixed on Tuesday in thin trading after shedding about 10 points in June, a market source said.

The 7½% senior notes due 2026 (Ca/CCC) were mostly flat at 70½ bid.

Transocean’s 8% debentures due 2027 (Ca/CCC+) dropped 1½ points to 66½ bid by the close.

The Vernier, Switzerland-based offshore driller’s 6.8% senior notes due 2038 (C/CCC) also declined about 2¾ points over the day to 49½ bid.

Talen notes soften

Talen Energy’s 6½% senior notes due 2025 (/D/C) softened about 1 point on Tuesday to 62½ bid, nearly triple the low of 22½ bid hit on March 31, a source said.

Talen’s 10½% senior notes due 2026 (C/CC/C) were last seen active on Friday and trading down 1½ points on a 63 handle.

The issue also has improved since April from trading with a handle in the high 20s.

The Woodlands, Tex., and Allentown, Pa.-based power generation and infrastructure company filed for Chapter 11 bankruptcy in May.

In June, the U.S. Bankruptcy Court of the Southern District of Texas approved a $1.76 billion debtor-in-possession financing package that includes a $1 billion term loan, a $300 million revolving credit facility and a $458 million letter-of-credit facility.

Endo unchanged

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/C) went out flat at 8 bid in mostly light trading, a source said.

The bonds were unchanged in thin activity also ahead of the Fourth of July holiday.

Endo reported in a regulatory filing on Friday that it was notified by the Nasdaq Stock Market that it was not compliant with minimum bid requirements after the company’s stock had traded below $1 per share in the past month.

Endo reported Thursday that it missed a $38 million interest payment on its 6% senior notes due 2028. The Dublin-based pharmaceuticals maker has a 30-day grace period before a default is declared.

Endo’s stock fell 8.79% on Tuesday to 52 cents.

Distressed index soft

S&P U.S. High Yield Corporate Distressed Bond index returns in the first session of July were minus 0.39%, improved from minus 1.96% in the prior day.

Month-to-date total returns were minus 0.39% on Friday, following June total returns of minus 9.49%.

Year-to-date total returns softened ahead of the holiday weekend to minus 22.93% from minus 22.63% in the prior session.

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