Chesapeake Energy notes lower amid ratings upgrade; WeWork down after Q4 pullback

By James McCandless

San Antonio, Jan. 17 – As the week came to a close, the distressed debt market extended its attention on the newsmakers of recent days.

Chesapeake Energy Corp.’s notes were seen heading lower amid a ratings upgrade that the company received on Friday.

As oil futures made small gains, Oasis Petroleum Inc.’s issues tracked higher while Whiting Petroleum Corp.’s and Antero Resources Corp.’s paper fell.

Real estate startup WeWork Cos. Inc.’s notes were under pressure after reporting a significant drop in leasing activity in the fourth quarter.

Meanwhile, utilities name PG&E Corp.’s issues declined, snapping a five-day positive streak as it seeks a resolution with its creditors over a restructuring.

Drugmaker Mallinckrodt plc’s paper saw more positivity stemming from the highlighting of its debt reduction efforts at a conference.

Sector peer Endo International plc’s notes varied in direction.

Elsewhere, in the telecom space, Intelsat SA’s issues diverged.

Chesapeake lower

Chesapeake Energy’s notes were seen heading lower on Friday, traders said.

The 11½% notes due 2025 shifted down 3¼ points to close at 87¾ bid. The 7% senior notes due 2024 lost 1½ points to close at 60 bid.

The losses came despite the Oklahoma City-based independent oil and gas producer receiving a ratings upgrade from S&P Global Ratings on Friday.

The agency raised its overall rating to CCC from SD, citing the company’s recently completed debt exchange of $3.22 billion principal of senior unsecured debt.

S&P said that the change reflects its view that there is a possibility for additional “distressed exchanges” over the next 12 months, affirming a negative outlook.

Oil names mixed

As oil futures made small gains at the close, distressed energy names saw mixed movements, market sources said.

West Texas Intermediate crude oil futures for February delivery inched up 2 cents to end at $58.54 per barrel.

North Sea Brent crude oil futures for March delivery finished at $64.85 per barrel after a 23 cent rise.

Houston-based producer Oasis Petroleum’s issues tracked higher.

The 6¼% senior notes due 2026 improved by ½ point to close at 85 bid.

Denver-based peer Whiting Petroleum’s paper dipped.

The 6¼% senior notes due 2023 lopped off 2 points to close at 83 bid. The 6 5/8% senior paper due 2026 shed 2½ points to close at 65 bid.

Antero Resources, another Denver-based producer, saw its notes move under pressure.

The 5% senior notes due 2025 shaved off ¾ point to close at 67¾ bid. The 5 1/8% senior notes due 2022 dropped 2½ points to finish at 87¾ bid.

WeWork down

WeWork’s issues were under pressure throughout the session, traders said.

The 7 7/8% senior notes due 2025 declined by ¼ point to close at 79¼ bid.

News broke on Thursday that during the fourth quarter, the New York-based coworking name oversaw a significant drawback in leasing activity.

The company reported that it signed four new leases in Q4, representing a 93% reduction from the previous quarter.

As a result, the company lost its position as the top name in flexible office leasing to Spaces.

“It will be interesting to see where they land once they retool,” a trader said. “Their sector’s becoming more competitive every day.”

WeWork’s slowdown came after last year’s misstep on its valuation, causing it to shelve its IPO, replace its chief executive officer and cut 2,400 jobs.

PG&E declines

Meanwhile, utilities name PG&E’s paper declined at the end of the afternoon, market sources said.

The 6.05% notes due 2034 shaved off ¼ point to close at 114¼ bid.

This week, the San Francisco-based bankrupt electric utility’s structure saw a net positive amid ongoing negotiations between the company and its creditors over a restructuring plan.

As part of the alleged deal being worked on, creditors would receive equity and new debt if they agree to drop a restructuring plan they proposed in opposition to the company.

Also this week, the company acknowledged that it is not in full compliance with its probationary requirements for wildfire prevention.

It argued that circumstances beyond its control were the cause and that it was working on full compliance.

Mallinckrodt up

Drugmaker Mallinckrodt’s notes saw more positivity, traders said.

The 5¾% senior notes due 2022 jumped up 3 points to close at 50½ bid. The 4 7/8% senior notes due 2020 garnered 2½ points to close at 83 bid.

The Dublin-based pharmaceuticals name received positive market attention this week after CEO Mark Trudeau made a presentation on its debt reduction at a conference on Monday.

Trudeau said that it had achieved $1 billion in debt reduction, indicated that the company would seek further reductions and argued that it had several options to handle a $600 million April maturity wall.

Dublin-based generics producer Endo’s issues varied in direction.

The 6% senior notes due 2025 held level at 73¾ bid. The 6% senior notes due 2023 picked up ½ point to close at 80½ bid.

Intelsat diverges

Elsewhere, in the telecom space, Intelsat’s paper diverged, market sources said.

Intelsat Luxembourg SA’s 8 1/8% senior notes due 2023 lost 1½ points to close at 61½ bid. The 9½% senior paper due 2023 inched up ¼ point to close at 73¾ bid.

The Luxembourg-based satellite operator continues to wait for the Federal Communications Commission to establish the terms for a C-band spectrum auction, urging speed from the regulator this week.

As part of the C-Band Alliance, the company had been pushing for a private auction between the members of the industry group before the agency settled on the reverse late last year.

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