Energy drillers mixed; E&P easier despite crude price gains; Altice, Intelsat issues stay softer; Rite Aid gains

By Paul Deckelman

New York, Jan. 10 – Distressed debt, as well as the notes and bonds of other underperforming companies and sectors, were seen mostly mixed-to-lower on Wednesday, in line with a generally softer overall high-yield bond market that was pulling back a little after starting the new year off strongly.

With marine energy drilling company Ensco plc shopping a new deal around for likely pricing on Thursday and announcing a tender offer for some of its existing paper, those established bonds were busy on Wednesday and trading mixed.

Ensco drilling sector peers Noble Holding International Ltd. and Transocean Ltd. were mixed in active trading, but there was only limited activity in oil and natural gas exploration and production names like California Resources Corp. Cal Res and sector peer Continental Resources, Inc. eased despite continued crude oil price gains.

Away from the energy sphere, traders saw continued weakness in the bonds of domestic cable operator Cablevision and its ultimate corporate parent, Altice NV, ahead of an upcoming new deal from Cablevision unit CSC Holdings, LLC.

Also in the telecom space, communications satellite company Intelsat SA’s bonds were seen in retreat for a second straight session.

Retailer Rite Aid Corp.’s notes were firmer on the day.

Ensco existing bonds mixed

With global energy drilling company Ensco plc expected to bring its new eight-year notes to market, perhaps as early as Thursday, the company’s existing paper was seen mixed on the day.

A market source said that Ensco’s 4½% notes due 2024 were off by around ½ point on the session, closing at 89 bid, with more than $24 million of turnover.

However, the company’s 5¾% long bonds due 2044 were seen having held their own and then come, gaining 1 point on the day to close at 74½ bid, on volume of more than $19 million.

Ensco meantime announced plans to tender for a portion of three series of its outstanding 2019, 2020 and 2021 paper, funding that offer with the proceeds from the new deal (see related story elsewhere in this issue).

Other drillers mixed, E&P easier

Elsewhere among the energy names, a trader opined that “oil was a little bit better – but I don’t think all that much was going on.”

He saw Swiss-based offshore drilling company Transocean’s 7½% notes due 2026 down 1/8 point on the day at 105 3/8 bid, with over $13 million having traded.

But Cayman Islands-based sector peer Noble Holding’s 7¾% notes due 2024 were seen having firmed by 3/16 point, ending at 93 3/8 bid, while its 6.05% long bonds due 2041 closed at just under 71 bid, up nearly ¾ point on the day. Around $15 million of each issue changed hands.

Among the exploration and production names, a market source said that Los Angeles-based California Resources’ 8% second-lien senior secured notes due 2022 – considered a sector bellwether issue – eased by ¼ point, closing at 87 bid, but on volume of only around $6 million.

There was a little more activity in Oklahoma City-based E&P operator Continental Resources’’ 4 3/8% notes due 2028, which lost ½ point Wednesday to end at 101¾ bid, on volume of around $12 million.

The energy names eased despite continued firmness Wednesday in the world crude oil markets, helped by news of a larger-than-expected 4.9 million-barrel drawdown in U.S. crude oil stockpiles during the latest reporting period.

Key domestic grade West Texas Intermediate for February delivery rose by 61 cents per barrel in New York Mercantile Exchange dealings, settling at $63.57, while the main international grade, March-contract North Sea Brent crude was up by $38 cents per barrel in London futures trading, ending at $69.20.

It was the third straight gain and the fifth in the last six sessions, for both crude oil grades.

However, Houston-based E&P company EP Energy Corp.’s 8% notes due 2025 bucked the generally negative sector trend, firming by 3/16 point to end at 79 3/8 bid, with about $12 million traded.

Cablevision, Altice continue easing

Away from the energy arena, a trader said that “there’s CVC [i.e. Cablevision] news with Altice and all of that kind of telecom stuff was a little weaker,” continuing the negative trend also seen on Tuesday.

He saw Netherlands-based cable giant Altice’s 6 5/8% notes due 2023 trading down ¾ point to about 104 bid, with over $19 million traded.

The company’s ATCNA 7 5/8% notes due 2025 were down almost 1½, at 94¾, while its 7¾% notes due 2022 were down 1 ½ points to 98, both on volume of more than $17 million.

The trader said that Cablevision’s 5 7/8% notes due 2022 traded down ¼ point to 99½, while its 5¾% notes due 2024 were down 1½ points to 98 bid.

Bethpage, N.Y.-based domestic cable operator Cablevision – which was bought by Altice in 2016 and folded into the latter’s Altice USA Inc. division – is shopping around a $500 million offering of 10-year guaranteed senior notes, expected to price on Friday via its CSC Holdings, LLC subsidiary

The CSC offering’s proceeds will be used to fund a dividend to corporate parent Cablevision, which in turn will fund a dividend to its corporate parent, Altice USA, which will in turn use those proceeds to fund a dividend to its stockholders immediately prior to and in connection with the separation of Altice USA from Altice NV, announced on Monday by the parent company.

Intelsat retreat continues

Also in that communications area, a trader said that Luxembourg-based communications satellite operator

Intelsat SA’s various bonds were weaker for a second straight session Wednesday, although there was no fresh negative news that might explain that drop.

“They were all generally a little weaker today,” he said. He saw the Intelsat Connect Finance SA 12½% notes due 2022 down ½ point on “a handful of trades,” finishing at 83 bid.

Its Intelsat Jackson Holdings SA 7¼% notes due 2020 were down ½ point at 92½ bid, while its 9¾% notes due 2025 were off by 5/8 point at 95¼ bid.

He also saw the company’s more distressed Intelsat (Luxembourg) SA 8 1/8% notes due 2023 down 1½ points to 45 bid, while its 7¾% notes due 2021 were down 2¼ points, “on just one trade,” to 46½ bid.

Rite Aid on the rise

Bucking the overall easier market trend, Camp Hill, Pa.-based drugstore chain operator Rite Aid’s

Paper was seen better in active trading Wednesday.

Its 6 1/8% notes due 2023 edged up by 1/16 point to end at 91 11/16 bid, on brisk volume of more than $40 million.

Its 6¾% notes due 2021gained 3/8 point to end at 100¾ bid, on volume of more than $14 million.

Company executives gave a well-received presentation Wednesday at the 36th annual J.P. Morgan Healthcare Conference in which they touted the benefits – including substantial deleveraging – that will accrue from the pending nearly $4 billion sale of almost half of their stores to larger rival Walgreens Boots Alliance.

They unveiled what they called “the new Rite Aid,” – smaller but more nimble and able to operate with more flexibility and efficiency.

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