Distressed debt rises as Fed holds rates steady; oil’s increase helps the sector; Intelsat gains altitude

By Stephanie N. Rotondo

Seattle, Sept. 21 – Distressed bonds were gaining ground Wednesday with the rest of the markets, as the Federal Reserve opted to keep interest rates unchanged.

The central bank said that it was keeping rates at the current 0.25% to 0.50% rate. Notably, three members of the Federal Open Market Committee – Kansas City Fed president Esther George, Cleveland Fed president Loretta Mester and Boston Fed president Eric Rosengren – voted to raise rates to 0.50% to 0.75%, pointing to continuing signs of improvement in the economy and risk outlook.

A rate increase in December remains squarely on the table.

Also giving the distressed arena a boost was a hefty gain in domestic crude oil prices, which came as the U.S. Energy Information Administration announced a third consecutive decline in inventories.

Last week, crude inventories declined by 6.2 million barrels. That compared to a 3.4 million-barrel increase forecast by analysts polled by Reuters.

Domestic crude rose by 3.5% to $45.59 a barrel.

“There was a little rebound in oil today,” a trader said, which was helping the oil and gas space in particular improve.

EP Energy Corp., for instance, saw its 9 3/8% notes due 2020 adding 2½ points to close at 67½, according to a trader.

The company’s 6 3/8% notes due 2023 were meantime up nearly a point at 55¼.

Still, there were a couple oil and gas names that bucked the upward trend.

MEG Energy Corp. was one such name, as its 7% notes due 2024 dipped a point to 74¾.

Trading in the issue was “fairly active,” a trader said, though there was no fresh news on the Canadian oilsands producer.

CGG SA was another weaker name. A trader said its 6 7/8% notes due 2022 lost 3 points to end at 50.

Like, MEG, there was no news on the French geophysical services provider to the oil and gas industry.

Intelsat pushes higher

Intelsat SA paper was ticking higher during the midweek session, as the company’s president and chief executive officer spoke at the Goldman Sachs 25th Annual Communacopia Conference in New York.

A trader said the 7½% notes due 2021 gained over half a point to close at 74 7/8. The 7¾% notes due 2021 improved a point to 30, while the 5½% notes due 2023 pushed up over half a point to 69 3/8.

At the Goldman conference, Stephen Spengler said that the Luxembourg-based commercial satellite services provider planned to continue its debt buyback efforts throughout the rest of the year.

While the company is looking at all opportunities to take advantage of, it is particularly interested in dealing with its 2018 maturity, Spengler said.

“We have a maturity in 2018 that we have some time to deal with, but we need to deal with, obviously,” Spengler said. “There’s some other parts to the capital structure where there may be some advantageous actions to take to see if we can reduce some overall debt this year, and make sure that we have the liquidity for the company going forward.”

Caesars adds

Caesars Entertainment Operating Co. – the bankrupt unit of Caesars Entertainment Corp. – saw its 10% notes due 2018 jump 4 points to 59, a trader reported.

The sizeable gain came as the parent company said it would contribute over $5 billion to the “opco” in a settlement offer with bondholders.

The company’s lawyer said the figure was “the best and final proposal” given in negotiations with debtholders.

The increased amount will give creditors additional equity in the reorganized company and Apollo Global Management and TPG Capital – the backers of the casino operator – will agree to surrender their own equity position.

Creditors will, in return, give the company broad liability releases.

Junior bondholders still have to agree to the proposal. They have until Friday to submit their answer, or the offer will expire.

© 2015 Prospect News.
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