Avaya very active, though unchanged on session; retailers see mixed movement; Weatherford up on debt outlook

By Colin Hanner

Chicago, Feb. 2 – Another session of muted activity in the distressed market made the Groundhog Day effect seem quite literal on Thursday, as typical distressed names traded tightly and focus was mainly on movement in the new issues space, a trend of the past few sessions, traders said.

Telecommunications company Avaya, Inc. was “very active” in one series of its distressed notes, traders noted, but that was unchanged on the session.

“When you look at the top-volume names, the only real one was Avaya,” a trader said. “There weren’t many other notables. It is what it is, unfortunately.”

Teetering into the distressed space was retailer L Brands, Inc., which missed earnings on Thursday, and faltered a few points in one of its securities, a trader said. Fellow retailer Neiman Marcus Group, Inc. followed with a drop of its own.

Bucking the trend in distressed retail was apparel retailer rue21, Inc., which traded higher on Thursday.

In the exploration and production arena, Weatherford International plc was undoubtedly one of the biggest gainers on the day following an announcement by the company’s management it plans to cut its net debt by several billion dollars in the next few years.

On the other hand, EP Energy Corp. was down several points on the distressed front after the company priced new senior notes on Wednesday’s session.

Vanguard Natural Resources, LLC was unchanged after it filed for Chapter 11 bankruptcy on Thursday, iHeartCommunications, Inc. saw mixed movement following the auction of its credit default swaps and regularly traded Valeant Pharmaceuticals International, Inc., Community Health Systems, Inc. and Intelsat SA did not veer too far from where they started.

Avaya active

There were no apparent drivers of the activity for Avaya, Inc. on Thursday, especially so because the company’s notes were unchanged on the session.

Avaya’s 7% notes due 2019 were “very active” though flat, finishing right where they started with an 81½ handle, a trader said.

Another trader said he had seen the notes trade late in the day on Wednesday, dabble with an 80½ handle in morning trading on Thursday and go “out in an 81½ context” at the end of the session.

The L drops

Once L Brands announced its quarterly earnings on Thursday morning, the retailer’s stock and bonds fell but rebounded throughout the day, a trader said.

“I thought they were going to all be down,” a trader said of L Brand’s securities.

Of concern to the distressed arena were L Brands’ 6 7/8% notes due 2035, which were down “1 point and change” to 96½, a trader said.

Inching into regular high-yield, the 5 5/8% notes due 2022 were “very active” especially in morning trading, where they dropped 1 point to a 104 context, but gained that back to remain unchanged at 105 on the day.

L Brands saw an increase in quarterly sales year-over-year but fell below market expectations. The company, which sold the now-shuttered Limited stores in 2007, owns Bath & Body Works and Victoria’s Secret stores, among others.

Retail roundup

Neiman Marcus followed with a decline on the session, specifically in its 8% notes due 2021, which fell 1 point to 61, a market source said.

Rue21 saw a tick higher in its distressed notes, traders said.

The 9% notes due 2021 were up 1 point to 22 on “a couple of trades,” a trader said, while another trader said they were trading in the “low-to-mid 20s.”

On Monday, the retailer had been downgraded by Standard & Poor’s.

“The downgrade reflects our expectation that the company's weakened liquidity and low debt trading prices could culminate in a debt buyback or other restructuring action, which we would deem distressed and, therefore, akin to default,” said S&P credit analyst Mathew Christy in a news release.

Rounding out retailers were Claire’s Stores, Inc.’s 9% notes due 2019, which were down ¼ point to 48, a trader said.

Weatherford gains on debt outlook

After the company announced its fourth quarter results, including its intention to cut its net debt to below $3 billion by 2021, despite the recent industry down cycle, Weatherford International’s debt climbed, a market source said.

The 6.8% notes due 2037 were up 4½ points to 90, mirroring similar movement in its equities.

“We have just been through the most brutal down cycle in our industry’s history,” interim chief executive officer Krishna Shivram said on the company’s fourth quarter earnings conference call on Thursday.

When adjusted for the company’s plan to monetize two businesses it owns by the end of 2018, Weatherford’s “pro forma net debt reduces from $6.5 billion at the end of 2016 down to a range of $2.7 billion to $3.2 billion at the end of 2021,” Shivram said.

“We believe this debt-reduction journey is eminently achievable, and it is the single highest priority of the company to reduce net debt below $3 billion by 2021.”

Energy wrap-up

The previous session for EP Energy saw the oil and natural gas company bring $1 billion worth of eight-year notes to the market.

The following session on Thursday brought about a noticeable decline in one of the company’s distressed notes, particularly the 6 3/8% notes due 2023, which were down 2 points to 83½, a market source said.

Houston-based oil and gas explorer Vanguard Natural Resources announced it had filed for Chapter 11 bankruptcy protection on the session, adding that it had obtained a committed $50 million debtor-in-possession financing facility by several underwriters to add to the liquidity through the process, according to a news release.

While the company’s stock price plunged 62 cents, or 62.6%, to 37 cents, its 7 7/8% notes due 2020 were largely unchanged at 80¼, a trader said.

In coal, Murray Energy Corp.’s 11¼% notes due 2021 were down 3/8 points to 73, a market source said.

Notables trade tight

iHeartCommunications, Inc. saw movement in both directions on the session.

Its 9% notes due 2021 were up 3/8 point to 75 3/8, a trader said.

Another trader said the 14% notes due 2021 were “down a bit” to 35½ because of the credit-default swap auction, characterizing the downward movement as “technical trades.”

On Wednesday, the 14% notes were trading at 37¼.

In healthcare and pharmaceuticals, Community Health’s 6 7/8% notes due 2022 were down ½ point to 73½, a trader said, while Valeant Pharmaceuticals’ 6 1/8% notes due 2025 were down 1/8 point to 76 3/8.

Reversing course compared to Wednesday’s movement, Intelsat Jackson Holdings SA’s 7¼% notes due 2020 were down 1/8 point to 82¾, a trader said.

And the wind died down for Navios Maritime Holdings, Inc. in its 7 3/8% notes due 2022, which were up ¼ point to 71.

Devika Patel contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.