Murray Energy up on Moody’s, court ruling; California Resources ticks up with oil; Rite Aid down

By Colin Hanner

Chicago, June 30 – The distressed debt market was at a near-standstill on Friday, market sources said, with “almost nothing” trading before what many in the financial sector are treating as a four-day Independence Day holiday.

Action was mostly confined to new issues in the high-yield space – VeriSign Inc.’s $550 million 10-year issue, Venator Materials plc’s $375 million eight-year senior notes and Carrizo Oil & Gas Inc.’s $250 million eight-year senior notes among the most notable, a trader said – and distressed issues that were notable on the week carried lower volumes on the day.

“All of next week will be pretty quiet,” a market source said. “We’ll see if anything is trading Wednesday through Friday.”

St. Clairsville, Ohio-based private coal producer Murray Energy Corp. saw its bonds rise on Friday. The company saw its ratings upgraded by Moody’s Investors Service – but saw adverse action by a federal appeals court which overturned a decision by a lower court that had forced the Environmental Protection Agency to report on how regulations impacted the coal industry. Murray was the driver behind having the study carried out.

Friday capped the week of five-straight sessions of gains for oil, with weekly data from Baker Hughes showing a decrease in active oil rigs for the first time in six months.

Among the more notable names on the day, California Resources Corp. and Pacific Drilling Co. were fractionally higher.

Rite Aid Corp., which was higher on Thursday after Walgreens Boots Alliance Inc. announced it would buy half of Rite Aid stores for more than $5 billion, traded slightly lower in one of its more notable issues from a day prior.

Valeant Pharmaceuticals International Inc. saw a slight uptick in one of its bonds, and a handful of distressed names traded with some volume on an otherwise lackluster session.

Murray higher

Murray Energy was among the distressed arena’s most active gainers on the session after the company’s name creeped into the news twice on Thursday.

In legal action, a federal appeals court ruled there was no need for a study that had forced the EPA to write a report on how the Clean Air Act had affected the coal industry, media reports said.

The decision, which stems back to a decision by a West Virginia court decision last year, is expected to be appealed by Murray Energy.

At the same time, Moody’s completed a review of the company’s credit ratings and lifted the corporate family rating to B3 from Caa2, probability of default rating to B3-PD from Caa2- PD, first-lien term loan to B2 from Caa1 and second-lien debt to Caa2 from Caa3.

The review was begun in March after Murray said it will contribute $60 million in cash to Foresight Energy LLC in the form of common equity, and exercise its option to acquire an additional 46% voting interest in Foresight Energy GP LLC, thereby increasing its voting interest to 80%.

Moody’s said the ratings reflect its expectation that Murray Energy will exercise substantial control over Foresight’s dividend distribution policies, because following the increase in voting interest, the company can now appoint all but one of Foresight’s board members.

Murray’s 11¼% notes due 2021 were up 1¾ points to 75¾, a market source said.

Oil caps weekly gain

After flirting a $42 per barrel price earlier in the week, oil capped a weekly gain on Friday after supportive data from oil field service company Baker Hughes reported that the total oil rig count fell by two to 756, its first weekly decline in six months.

On the day, West Texas Intermediate crude was up $1.28, or 2.85%, to $46.21 near the end of the session.

California Resources’ 8% notes due 2022 were up ½ point to 63½.

EP Energy Corp.’s 9 3/8% notes due 2020 were up 1½ points to 79 3/8.

Pacific Drilling’s 7¼% notes due 2017 were up 5/8 point to 50 7/8.

Oilfield service corporation Calfrac Well Services Ltd.’s 7½% notes due 2020 were up 1¼ points to 86¼.

Distressed roundup

After Walgreen announced it would seek to acquire 2,186 Rite Aid stores and related assets for $5.175 billion, Rite Aid’s bonds flew as its stock plunged.

On Friday, Rite Aid’s 6 1/8% notes due 2023 were off ½ point to ¾ point to a 98½-to-98¾ zip code, a market source, adding that the regulatory hurdles from the Federal Trade Commission that still face the proposed acquisition caused some speculation around the company.

In a similar space, Valeant Pharmaceuticals teetered back into positive territory on Friday after a slight decrease on Thursday.

Its 6 1/8% notes due 2025 were up 3/8 point to 85, a market source said.

Since speculation surfaced on Monday, Valeant has been at the crosshairs of a potential debt-equity swap.

Global shipper Navios Maritime Holdings Inc. was unchanged in its 7 3/8% notes due 2022, which finished at 77¾.

And Windstream Holdings Inc.’s 6 1/8% notes due 2023 were up ¼ point to 82½.

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