PG&E bonds lower as restructuring approved; Frontier Communications eyed as ratings cut

By James McCandless

San Antonio, March 17 – Tuesday’s distressed debt session ended with mixed movements as the federal government outlined its aid package to an economy weakened by the coronavirus.

PG&E Corp.’s notes shifted lower after the company received the approval of California’s governor to move forward with its restructuring plan.

Meanwhile, Frontier Communications Corp.’s issues varied in direction as the name had its ratings slashed.

Sector peer Intelsat SA’s paper also diverged.

In oil and gas, Chesapeake Energy Corp.’s notes declined after news broke that it has hired restructuring advisers.

More weakness in oil futures translated to losses for Whiting Petroleum Corp.’s issues while California Resources Corp.’s and Laredo Petroleum, Inc.’s paper moved in different directions.

Elsewhere, retailer L Brands, Inc.’s notes trailed after the company announced that it would be temporarily closing its retail stores.

Drug store chain Rite Aid Corp.’s issues pushed higher.

PG&E lower

PG&E’s notes shifted lower by the end of the day, traders said.

The 6.05% notes due 2034 lost 2 points to close at 104 bid.

After the close on Monday, news broke that the San Francisco-based bankrupt electric utility received court approval to enter debt financing commitment letters, Prospect News reported.

The move comes after California governor Gavin Newsom dropped his opposition to the plan, though a final deal has yet to be reached.

The approval is for the company to enter into commitments for the backstop of the issuance of up to $12 billion of post-bankruptcy common stock and debt financing commitment letters that provide up to $10.825 billion in funding.

The deal still requires the final approval of creditors.

The utility filed for Chapter 11 bankruptcy in January 2019 after a string of wildfires led to billions of dollars in potential liabilities.

Frontier, Intelsat active

Meanwhile, Frontier’s issues varied in direction, market sources said.

The 10½% senior notes due 2022 added ¾ point to close at 34¾ bid. The 11% senior notes due 2025 held level at 34 bid.

During the Tuesday session, ratings agencies trimmed ratings for the Norwalk, Conn.-based wireline communications name.

Early Tuesday, S&P Global Ratings downgraded the company’s overall rating to SD from CCC-, also lowering issue-level ratings.

Shortly afterward, Fitch Ratings lowered its long-term issuer default rating to C from CC.

Both changes were in reaction to the company’s decision to forego paying about $322 million in interest payments, triggering a 60-day forbearance period.

The company plans to file for Chapter 11 bankruptcy after it strikes a deal with creditors on a restructuring.

Luxembourg-based satellite operator Intelsat’s paper also diverged.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 tacked on ¾ points to close at 26¼ bid. The 9½% senior notes due 2023 shaved off ¾ point to close at 44 bid.

Chesapeake off

In the oil and gas space, Chesapeake Energy’s notes declined, traders said.

The 11½% notes due 2025 fell 1½ points to close at 15 bid. The 8% senior notes due 2025 dipped ½ point to close at 11½ bid.

After the close on Monday, news broke that the Oklahoma City-based independent oil and gas producer has hired restructuring advisers to tackle its debt load of about $9 billion.

The company has tapped Kirkland & Ellis and Rothschild & Co. as its advisers.

Several measures have already been taken to slash its debt, with the company saying in January that it had reduced debt by $900 million.

“Energy companies are in a unique situation when it comes to restructuring,” a trader said. “If a company isn’t profitable when oil is above $30 a barrel, then how can they guarantee they can profit under $30 a barrel?”

Oil weaker

More weakness for crude oil futures translated to negative trends for distressed energy tranches, market sources said.

West Texas Intermediate crude oil futures for April delivery shed $1.75 to settle at $26.95 per barrel.

North Sea Brent crude oil futures for May delivery ended the day at $28.73 per barrel after a $1.32 drop.

Denver-based producer Whiting Petroleum’s issues were under pressure.

The 6¼% senior notes due 2023 shaved off ¾ point to close at 14¼ bid. The 6 5/8% senior notes due 2026 dived 4½ points to close at 12 bid.

Los Angeles-based peer California Resources’ paper moved in different directions.

The 6% senior notes due 2024 were pushed down 2½ points to close at 7½ bid. The 8% senior secured paper inched up ¼ point to close at 5 bid.

Tulsa, Okla.-based producer Laredo Petroleum’s notes also saw differing movements.

The 9½% senior notes due 2025 lost ¾ point to close at 39 bid. The 10 1/8% senior notes due 2028 were lifted 3½ points to close at 39 bid.

L Brands trails

Elsewhere, retailer L Brands’ issues were seen trailing, traders said.

The 6¾% senior notes due 2036 gave up ½ point to close at 78 bid. The 5¼% senior notes due 2028 declined by 3¾ points to close at 75¼ bid.

The Columbus, Ohio-based retail name announced on Tuesday morning that it would close all of its Bath & Body Works, Victoria’s Secret and PINK locations in the United States and Canada from March 17 to March 29.

The move comes as many areas in the country are ordering the closure of non-essential businesses in order to prevent further spread of the coronavirus.

Concurrently, the company announced that it has drawn down $950 million from a secured revolving credit facility and has $2 billion in cash as a result.

“It’s unprecedented, but the bonds didn’t have as bad a reaction as you would expect,” a trader said. “Everyone is very aware of emphasizing how financially stable they are currently. A few months down the line is a different story.”

Camp Hill, Pa.-based drug store chain Rite Aid’s paper pushed higher.

The 6 1/8% senior notes due 2023 jumped up 5½ points to close at 86½ bid.

© 2015 Prospect News.
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