Energy names dominate distressed; First Energy adds to gains; Frontier, Intelsat stay busy

By James McCandless and Paul Deckelman

San Antonio, Texas, Jan. 24 – Oil, natural gas and other energy-related companies drove the market for distressed debt and underperforming issues on Wednesday, with positive commodity prices and Saudi comments on oil at the World Economic Forum in Davos accounting for much of the volume, traders said.

The most active name in the energy sector was EP Energy Corp. Another highly traded name was coal producer Armstrong Energy, Inc., which announced that Murray Energy Corp. would take ownership of a majority of the bankrupt company’s assets, according to a market source.

Other energy notes that were actively traded included Denbury Resources Inc. and California Resources Corp.

In the utility area, FirstEnergy Corp. notes extended gains that were spurred by the news earlier this week that several investors had put up $2.5 billion for the company. The notes rose further after Moody’s Investors Service confirmed its stable outlook for the company, a trader said.

In the telecom space, Frontier Communications Corp.’s paper and Intelsat SA’s notes continued their high volume of activity, though with mixed results.

Energy names up on Saudi comments

Many energy names, chief among them EP Energy, were heavily traded in the distressed debt market after Saudi Arabian representatives at the World Economic Forum in Davos, Switzerland, made what traders described as positive comments about Saudi oil giant Saudi Aramco and shale production.

“They are going to IPO Saudi Aramco when the time is right,” a trader said. “They are not looking to increase production soon. They want to keep a balance and push crude oil higher. It seemed like a disciplined response from the Saudis.”

The Houston-based oil and gas exploration and production company’s 9 3/8% notes due 2024 closed at 87¼ bid, rising a point from the previous day. More than $56 million traded – the most active credit of the day.

Other energy names picked up steam throughout the day, like Denbury Resources; the Plano, Texas-based oil and natural gas company saw its 5½% notes due 2022 fall ¼ point to close at 79½ bid while the 6 3/8% notes due 2021 shot up by 2 points to end the day at an even 84 bid, according to a market source.

California Resources was another actively traded energy name. The Los Angeles-based oil and gas production firm’s 8% notes due 2022 climbed ¾ point to finish at 87¼ bid while the 6% notes due 2024 remained steady at 76½ bid.

Armstrong gains on Murray deal

Armstrong Energy’s planned sale of a majority of its assets resulted in a jump in the St. Louis-based coal company’s paper, mainly the 11¾% notes due 2019. They rose almost 3 points, from about 15¾ bid to end the day at almost 19 bid, according to a trader.

Under the deal announced on Wednesday, St. Clairsville, Ohio-based Murray Energy’s subsidiary Murray Kentucky will acquire a 51% ownership interest in a new company that will own some assets formerly held by Armstrong Energy, while Armstrong’s secured noteholders will have a 49% ownership interest in the new entity (see related story elsewhere in this issue).

A market source meantime saw Murray’s 11¼% notes due 2021 gain 1½ points to 53¾ bid.

“I think the theme is that you had a lot of commodity-driven names trade higher on the underlying commodity with news helping,” a trader said.

First Energy gains continue

In the utilities segment, FirstEnergy Corp.’s gains continued, gaining steam as Moody’s announced that it had reaffirmed its stable outlook for the company after a group of investors plugged $2.5 billion into it as part of a restructuring agreement.

The Akron, Ohio-based power producer’s First Energy Solutions Corp. 6.05% notes due 2021 rose almost 4 points to close around 47½ bid while its 6.8% bonds due 2039 rose to 44 bid, a trader said.

Communications names stay busy

Norwalk, Conn.-based wireline telecom company Frontier Communications Corp. continued to be a well circulated name in the day’s activity, its 10½% notes due 2022 returning to their Monday-level of 83½ bid, while its 11% notes due 2025 rose ½ point to 78¼ bid.

Luxembourg-based communications satellite company Intelsat’s notes continued to be heavily traded Wednesday, said a trader, with declines across the board.

Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 shaved off a small amount of yesterday’s gains, ending at almost 44 bid. The 7¾% notes due 2021 fell more than a point to 45¾ bid.

Intelsat Jackson Holdings SA’s 7¼% notes due 2020 notes fell 1¼ point to close at 87¼.

“For Frontier and Intelsat, there’s no real new news there,” a trader said.

“They’re just something that trades heavily every single day.”

© 2015 Prospect News.
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