Winter storm clips energy issuers; Shelf Drilling, Washington Prime, HighPoint up

By Cristal Cody

Tupelo, Miss., March 17 – Energy providers continue to face fallout over exorbitant energy costs and damage from the February winter storm that hit Texas and the central United States in February.

NRG Energy Inc. reported Wednesday that it expects an estimated $750 million loss due to the Texas winter storm and withdrew its 2021 guidance provided March 1 due to new resettlement data from the Electric Reliability Council of Texas.

NRG’s bonds remained strong on Wednesday, trading in the high 90s to above par and yielding less than 7%, a market source said.

On Wednesday, S&P Global Ratings placed NRG Energy’s BB+ issuer rating on CreditWatch with negative implications.

S&P said it earlier anticipated a financial impact to NRG in the $250 million to $300 million range.

Talen Energy Supply LLC’s 6½% senior notes due 2025 (B3/CCC+/B) fell to 82½ bid, down from 83 bid on Tuesday and 83½ bid on Monday, a source said.

The Allentown, Pa.-based power company held a conference call on Thursday to discuss its fourth-quarter and year-end earnings results and the impact from the February winter storm.

Houston-based oilfield services company Nine Energy Service, Inc.’s 8¾% notes due 2023 (Caa2/D) were last seen active in the secondary market on Monday at 50½ bid, a source said.

The notes were up ½ point from Friday after softening in the prior two sessions.

The issue has recovered some ground in March after trading down to 44 bid in February.

The company reported the February winter weather storm caused major shutdowns within all its service lines in Texas, and it expects to generate a net loss and negative adjusted EBITDA for the first quarter.

San Antonio electric utility CPS Energy announced Friday that it filed suit against Ercot for charging excessive prices during the storm.

Newark, N.J.-based energy supplier Genie Energy Ltd. reported Thursday the spot energy prices soared from a usual $50 per megawatt hour to $9,000 per megawatt hour.

Some energy companies already have filed bankruptcy due to the winter storm, including Griddy Energy LLC, which announced Monday it had filed for Chapter 11.

Oil prices soft

Oil prices saw a fourth consecutive day of declines on Wednesday.

North Sea Brent crude oil futures for May deliveries dropped 39 cents to settle at $68.00 a barrel.

West Texas intermediate crude oil futures for May deliveries fell 20 cents to settle at $64.60 a barrel.

Overall, market tone was stronger on the day after the Federal Reserve made no changes following its monetary policy meeting on Wednesday, leaving the Federal Funds rate at zero to ¼%.

The iShares iBoxx High Yield Corporate Bond ETF rose 12 cents, or 0.14%, to $86.39.

Dallas-based gas supplier Energy Transfer Operating LP’s 3.232% junior subordinated notes due 2066 (Ba1) traded more than 1¼ points better on the day to 71 5/8 bid, a source said.

Shelf Drilling Holdings Ltd.’s existing 8¼% senior notes due 2025 (Caa3/CCC+) also improved on Wednesday, trading up 1¼ points to 76¾ bid, a market source said.

Washington Prime edges up

Washington Prime Group, LP’s 6.45% notes due 2024 (C/D/C) were seen trading in the afternoon at 57 bid in heavy secondary supply, up from 56½ bid on Tuesday, a source said.

The notes have softened from the 73½ bid range in mid-February.

On Wednesday, S&P dropped the notes to D from C.

Washington Prime Group, Inc. disclosed last month that the operating partnership withheld a $23.2 million interest payment on the notes that was due on Feb. 15.

The Columbus, Ohio-based shopping center real estate investment trust announced Tuesday that it would default on the notes on Wednesday, but it has entered a forbearance period with its lenders and noteholders for a period that ends March 31.

Washington Prime said it may file for Chapter 11 bankruptcy restructuring, according to a 10-K filing with the Securities and Exchange Commission on Tuesday.

The company also said it is engaged in discussions on a potential deleveraging or restructuring of the notes, which may need to be implemented by filing for bankruptcy.

Washington Prime on Tuesday reported a fourth-quarter loss for the period ended Dec. 31 of $111.4 million, or $5.24 per diluted share, compared to a profit of $17.1 million, or 81 cents per diluted share, in the same quarter a year ago.

For fiscal 2020, the company reported a loss of $11.04 per share, up from a loss of 47 cents per share for fiscal 2019.

HighPoint notes improve

In other distressed secondary trading, HighPoint Resources Corp.’s 7% senior notes due 2022 (C/D/) rose 2 points to 56 bid after heading out flat on Tuesday, a market source said.

The notes have softened from 62¼ bid on Friday ahead of the company’s announcement on Sunday that it filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware to facilitate its previously announced pre-packaged plan of reorganization and merger plan with Bonanza Creek Energy, Inc.

A hearing on the natural gas and oil exploration company’s plan is set for March 18.

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.

S&P Global Ratings on Tuesday downgraded the company 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.

HighPoint 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, while a majority of holders of HighPoint’s notes and its stock approved the pre-packaged plan.

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

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