Shelf Drilling notes dip; Rio Energy gains; Hertz, Mallinckrodt, Diamond Sports improve

By Cristal Cody

Tupelo, Miss., March 16 – Distressed energy bonds saw mixed trading on Tuesday as oil prices softened a third day.

Shelf Drilling Holdings Ltd.’s 8¼% senior notes due 2025 (Caa3/CCC+) slipped 1½ points during the session to 75½ bid after declining ¾ point in the prior day, a market source said.

The company priced $310 million of new 8 7/8% senior secured notes due 2024 on Friday.

Meanwhile, Rio Energy International, Inc.’s 6 7/8% notes due 2025 (Ca) traded more than 1¼ points higher at 66¼ bid by late afternoon, a source said.

Oil prices were down a third consecutive session on Tuesday.

West Texas intermediate crude oil futures for May deliveries settled 59 cents lower at $64.80 a barrel.

North Sea Brent crude oil futures for May deliveries fell 49 cents to settle at $68.39 a barrel.

Overall market tone was mostly softer over the day as the Federal Reserve kicked off a two-day monetary policy meeting.

The iShares iBoxx High Yield Corporate Bond ETF fell 22 cents, or 0.25%, to $86.27.

No major policy changes are expected after the Fed concludes its meeting on Wednesday, a market source said.

HighPoint unchanged

In other energy issues traded Tuesday, HighPoint Resources Corp.’s 7% senior notes due 2022 (C/D/) headed out flat at 54 bid after trading as low as 53 bid earlier in the session, a source said.

The notes have softened from 62¼ bid on Friday.

The natural gas and oil exploration company announced on Sunday that it filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware to begin its previously announced pre-packaged plan of reorganization and merger plan with Bonanza Creek Energy, Inc.

S&P Global Ratings on Tuesday downgraded HighPoint and its senior notes to D from C.

On Monday, Moody’s Investors Service dropped HighPoint’s probability of default rating to D-PD from C-PD.

The company announced in November that it agreed to merge with Bonanza Creek Energy in a debt-for-equity exchange transaction valued at about $376 million.

The companies planned to hold a registered exchange offer and consent solicitation and simultaneous solicitation of a Chapter 11 pre-packaged plan of reorganization for the merger, or the bankruptcy filing only if the conditions on the exchange were not met.

The conditions to Bonanza Creek’s exchange offer for HighPoint’s 7% and 8¾% notes were not met when the offer expired on Thursday. The company reported Friday that a majority of holders of HighPoint’s notes and its stock voted to accept the pre-packaged plan.

The merger is expected to close in the second quarter under the pre-packaged plan.

Hertz notes gain

Meanwhile, bankrupt car rental company Hertz Corp.’s 5½% notes due 2024 climbed 1½ points on Tuesday to 88¼ bid on strong volume, a market source said.

The notes are trading more than 10 points higher since the end of February.

At the start of March, the car rental operator filed a joint Chapter 11 bankruptcy plan of reorganization and reported it received a $4.2 billion buyout offer from Knighthead Capital Management, LLC and Certares Opportunities LLC.

A hearing on the offer is scheduled for April 16 in the U.S. Bankruptcy Court for the District of Delaware.

Hertz filed for Chapter 11 bankruptcy in May 2020.

Mallinckrodt trades up

Bankrupt pharmaceuticals maker Mallinckrodt plc’s bonds remained mostly stronger in the distressed space on Tuesday, a source said.

Mallinckrodt’s 4¾% senior notes due 2023 rose more than 2 points to 16¼ bid.

The notes traded in the same session a week ago at 9 bid.

Mallinckrodt’s bonds rallied after the company announced last week that it reached an agreement to pursue a plan of reorganization.

The company (/D/) filed for Chapter 11 bankruptcy in October in the U.S. Bankruptcy Court for the District of Delaware.

On Wednesday, Mallinckrodt announced it reached agreement with a group of first-lien term lenders holding about $1.3 billion of its outstanding first-lien term loans to support the company's restructuring support agreement.

The company received approval on Feb. 25 to extend filing a bankruptcy restructuring plan until Aug. 9.

Diamond Sports stronger

In other distressed secondary trading, Diamond Sports Group LLC’s 6 5/8% senior notes due 2027 (B3/CCC-) were quoted up 2 points at 58 bid on strong volume on Tuesday, a market source said.

The notes had declined ½ point on Monday.

Moody’s downgraded the issue last week.

Parent company Sinclair Broadcast Group, Inc. reported in February soft guidance for the sports broadcast group and an interest in liability management initiatives that could include a debt exchange or redemption.

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