Energy gains despite crude oil slide; retailers on the rise; communications credits mixed

By Paul Deckelman

New York, Dec. 4 – The first full trading week of December began on a mostly firmer note in the market for distressed debt and the bonds of otherwise underperforming companies and sectors.

Energy exploration and production names such as California Resources Corp., Denbury Resources Inc. and EP Energy Corp. were seen having firmed smartly, despite a slide in crude oil prices following two straight upside sessions.

Valeant Pharmaceuticals International, Inc.’s existing paper was heard to have advanced, even as the Canadian drug manufacturer brought a big new deal to market on Monday.

Retailing names such as J.C. Penney Co., Inc. and PetSmart, Inc. were doing well, reflecting investor optimism about what is so far shaping up to be a strong holiday shopping season.

Among the communications names, domestic wireline operator Frontier Communications Corp. was better, while sector peer CenturyLink, Inc. and European cable and broadband provider Altice were mixed.

Hospital operator Community Health Systems, Inc. was lower on the day.

Energy improves despite crude fall

In the energy sphere, oil and gas names shrugged off a sizable drop in crude oil prices Monday, continuing their recent upside momentum.

California Resources’ 8% notes due 2022 shot up by 1¼ points to end at 77½ bid, with over $22 million having traded.

That gain followed Friday’s 1 7/8 points surge.

Elsewhere in that sector, Denbury Resources’ 6 3/8% notes due 2021 jumped by more than 2 points, to 76½ bid. Its 4 5/8% notes due 2023 likewise firmed to 66¾ bid, on volume of over $12 million

EP Energy Corp.’s 9 3/8% notes due 2020 rose by 1 ¾ points, to 76¾ bid, also on over $12 million of volume.

The sector improved across the board despite crude oil suffering its first fall after two straight higher sessions.

January-delivery West Texas Intermediate crude fell by 89 cents a barrel in New York Mercantile Exchange trading, ending at $57.47, wiping out most of Friday’s 96-cent gain, while the February North Sea Brent crude contract fell by $1.28 per barrel to $62.45, more than offsetting Friday’s $1.10 rise.

Existing Valeant bonds better

Elsewhere, a trader noted that “even with Valeant bringing a big new deal today,” – i.e., Monday – the Laval, Que.-based pharmaceuticals manufacturer’s existing paper all turned higher.

He saw its 6 1/8% notes due 2025 up 1 point, to the mid-87 bid level.

A second trader saw them 1 1/8 points better, at 87 5/8 bid, with over $16 million having traded.

Its 5½% notes due 2023 finished up 1½ points on the day, at just under 88½ bid.

Valeant plans to use the new-deal proceeds from its quickly shopped $1.5 billion tranche of 9% notes due 2025 to fund tender offers for its three issues of senior notes maturing in 2020.

Retailers on the rise

Retailing names such as J.C. Penney Co. and PetSmart were doing well, Monday, reflecting investor optimism about what is so far shaping up to be a strong holiday shopping season.

Penney’s 5 7/8% notes due 2023 soared by nearly 1½ points, ending just below 96½ bid, on about $15 million of volume, while its familiar 5.65% notes due 2020 also gained 1½ points, closing at 95¼ bid.

Fellow retailer PetSmart’s 5 7/8% notes due 2025 went out ½ point better, at 87 bid.

Communications names mixed

Among the communications names, domestic wireline operator Frontier Communications Corp.’s 7 5/8% notes due 2024 ended up ½ point on the day at 71 bid.

Sector peer CenturyLink’s bonds were mixed, with its 7½% notes due 2024 up more than ¼ point, at 97¼ bid, while its 5 5/8% notes due 2025 lost more than ½ point, closing around 88 7/8 bid.

European telecom company Altice’s bonds were also mixed. Its 7¾% notes due 2022 gained more than 1/8 point, rising to 96 9/16 bid. Its financing unit’s 7½% notes due 2026 were down more than ½ point, at just under 104 bid.

Hospital hardship continues

Hospital operator Community Health Systems, Inc. was lower on the day, its 8% notes due 2019 losing 1¼ point to finish at 90- bid.

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