Telesat paper rallies after weak earnings report; Talen notes mixed; Kronos improves

By Cristal Cody

Tupelo, Miss., March 18 – Telesat Corp.’s distressed junk bonds rallied 6¼ points to 6½ points in heavy secondary action on Friday after the company reported fourth-quarter earnings plunged from the prior year.

Market tone remained positive over the day with stock indices higher and volatility ticking down following the Federal Reserve’s 25 basis point rate hike on Wednesday.

The Chicago Board Options Exchange’s CBOE Volatility index was 7.01% lower at 23.87.

The iShares iBoxx High Yield Corporate Bond ETF closed up 27 cents to $82.53.

Oil also ended the day stronger as Russia’s invasion of Ukraine drags on into a fourth weekend.

West Texas Intermediate crude oil benchmark futures for April deliveries settled up $1.72 at $104.70 a barrel.

Talen Energy Supply LLC’s senior notes improved 1½ points to 1¾ points, while its senior secured paper fell 1 point to 1½ points during the session.

Talen’s credit default swap spreads have been soft and widened over 2,500 bps for the past week ended Wednesday.

In other distressed issues, Kronos Acquisition Holdings Inc.’s 7% senior notes due 2027 (Caa2/CCC) were one of the week’s gainers.

Telesat bonds climb

Telesat’s paper jumped 6¼ points to 6½ points in heavy secondary action after the company reported fourth-quarter results on Friday, a source said.

Telesat Canada LLC’s 6½% senior notes due 2027 (Caa1/B) climbed 6½ points to 51½ bid on more than $23.7 million of trading volume.

Telesat Canada’s 4 7/8% senior secured notes due 2027 (B1/BB-) were 6¼ points better at 75¼ bid on Friday afternoon on over $21.57 million of supply.

The Ottawa-based satellite communications company reported Friday that consolidated 2021 revenue fell 8%, while net income declined to $158 million from $246 million in 2020.

For the fourth quarter, Telesat said consolidated revenue softened 7% and net income dropped to $97 million from $255 million in the year-ago quarter.

In November, Telesat Canada and Loral Space & Communications Inc. completed a merger with the company now publicly traded on the Nasdaq and Toronto Stock Exchange under the ticker “TSAT.”

Talen notes mixed

Talen’s senior notes improved 1½ points to 1¾ points, while its senior secured paper fell 1 point to 1½ points on Friday, sources said.

Talen’s 6½% senior notes due 2025 (Caa2/CCC/CCC) improved 1½ points to 27½ bid after trading as high as 29 bid over the session.

The notes were going out about 4½ points lower on the week.

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) recovered 1¾ points in thin trading on Friday to 29 bid.

The notes were about 8¼ points softer on the week.

Talen’s 7¼% senior secured notes due 2027 (B1/B/B) traded Friday down 1 point at 87 bid on strong volume totaling $14.54 million.

The 7 5/8% senior secured notes due 2028 were 1½ points lower in late afternoon trading at 86¾ bid on $7 million of supply.

The Woodlands, Tex., and Allentown, Pa.-based power company’s CDS spreads have been increasing since February with spreads 2,516 bps wider at 7,717 bps for the week ended Wednesday, according to a Moody’s Investors Service report.

Kronos issue higher

Kronos’ 7% notes due 2027 (Caa2/CCC) rose about 1¾ points in thin supply on Friday to the 79 bid range, a source said.

The notes were about 2¾ points higher from a week ago.

Concord, Ont.-based Kronos operates KIK Custom Products Inc., a household cleaning, pool sanitation and automotive chemicals company.

Distressed returns positive

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return came to 0.55% on Thursday, compared to 0.67% on Wednesday, minus 0.91% on Tuesday and minus 1.07% on Monday.

Month-to-date total returns improved to minus 3.65% on Thursday, versus minus 4.18% on Wednesday, minus 4.81% on Tuesday and minus 3.94% at the week’s start.

Year-to-date index returns rose to minus 6.87% from minus 7.38% on Wednesday, minus 8% on Tuesday and minus 7.15% on Monday.

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