E&P names rally off early morning trend in oil prices; Community Health wraps asset sale

By Colin Hanner

Chicago, Jan. 3 – Activity resumed on the first trading day of the new year on Tuesday, and movement in the distressed arena picked up from its pre-holiday lull, jumpstarted by up-then-down movement in oil future prices and company-specific news.

“We’re not back in the full-swing, but there was a fair amount of activity in high-yield” and distressed, a market trader said, adding that his firm saw $2 billion of activity in the high-yield market.

Distressed exploration and production names were mostly up off the polarizing price of oil on the session, with a majority capitalizing on the run oil futures had heading into morning session. Others pared previous gains when oil dropped to lows toward the end of the day.

California Resources Corp. saw a nearly two-point gain in its most popular distressed securities, though a trader said the upward tick may have come in earlier trading.

Similar circumstances were felt in Linn Energy, LLC, French-based geophysical company CGG SA and MEG Energy Corp., which all reflected a positive session, mirroring the earlier trend in oil.

In healthcare and pharmaceuticals, Community Health Systems, Inc. announced an asset sale, though it did not seem to stir much movement in its distressed notes.

Canadian pharmaceutical company Valeant Pharmaceuticals International, Inc.’s distressed notes were up modestly on the day, a trader said.

Regularly-mentioned distressed names like iHeartCommunications, Inc. and Intelsat SA saw some diffident activity in both directions, and several one-off names moved on the day.

Bonds up on oil’s shaky day

“It’s almost not distressed anymore,” said one trader when referring to the movement California Resources made on Tuesday. Its 8% notes due 2022 were up 1½ points to 90½, the trader said.

Several other oil and natural gas producers followed suit on the day.

Inching its way out of distressed territory were MEG Energy’s 7% notes due 2024, which were up 1 point to 92, as well as Denbury Resources Inc.’s 6 3/8% notes due 2021, up ½ point to 91½.

Linn Energy’s distressed bonds were one of the day’s biggest gainers, a market source said. Its 7¾% notes due 2021 were up 2 points to 43¾.

A market source said CGG’s 6½% notes due 2021 were up 1½ points to 48½.

GenOn Escrow Corp.’s 9 7/8% notes due 2020 were up ½ point to 69, a trader said.

EV Energy Partners, L.P.’s 8% notes due 2019 were up “4 [points] and some change,” a trader said, ending the session with a 75 handle.

The trader said that type of movement would usually be caused by something company-specific, though no news from or surrounding the oil and gas company seemed to be causing the movement.

Its equity shares were up 4 cents, or 1.91%, to $2.13 at market close.

Metal, coal, electric movers

Gold futures saw their highest levels in three weeks on Tuesday, spurring precious metal producers like Freeport-McMoRan Inc. to reflect the gains.

A trader said Freeport’s 5.45% notes due 2043 were up 1½ points to 84¼.

In coal, St. Clairsville, Ohio-based Murray Energy Corp.’s 11¼% notes due 2021 were up ¼ point to 77¾, a market source said.

There was very low activity with regards to Peabody Energy Corp. on the session, a trader said, as news surrounding the company’s plan of reorganization carried over into the new week.

Late Friday, additional eligible holders of 16.6% of the outstanding principal amount of the Peabody’s senior secured second-lien notes and 3.8% of the outstanding principal amount of its senior unsecured notes became parties to the plan support agreement, the backstop commitment agreement and the private placement agreement as phase-two parties.

“I’m not sure if it was because of people signing on to the PSA by Friday, so people are tied up now,” the trader said.

A trader said that several of Energy Future Holdings Corp.’s notes traded down after the company filed yet another plan of reorganization on Friday.

“[It] sounds like more fighting between various creditor groups over the most recent amended plan,” the trader said.

Moves in health & pharma

On Tuesday, Community Health Systems announced the sale of a majority ownership its home health division to Almost Family, Inc. for $128 million, according to a press release.

The hospital company saw modest, and in some cases, no gains on the session, a trader said.

The 6 7/8% notes due 2022 were unchanged at 70, and the 8% notes due 2019 were also unchanged, though settled with an 83½ handle.

A market source said the 5 1/8% notes due 2021 were up ¼ point to 93½.

And for pharmaceutical company Valeant, movement was up, particularly in its 6¾% notes due 2018, which were up ¾ point to 95¼. The 5 5/8% notes due 2021 followed with a ¾-point gain of its own, ending the day with a 78½ handle.

Its equities were up 72 cents, or 4.96%, to $15.24 at market close.

Intelsat, iHeart move

Coming off a flurry end-of-the-year events that pulled at its distressed securities was iHeartCommunications, which saw mixed movement on Tuesday.

Its 9% notes due 2021 were up ½ point to 74, a trader said, while its 9% notes due 2019 were down 3/8 point to 82 3/8.

Communication satellite provider Intelsat was up on a “fair amount” of activity, a trader said.

Its 12½% notes due 2022 – a security not often traded, a trader said – were up 2¾ points to 64¾, and the 7¾% notes due 2021 were up ½ point to 33¾.

Intelsat’s equities rose 18 cents, or 6.74%, to $2.85.

A mixed bag roundup

Gaming and entertainment company Caesars Entertainment Operating Co.’s 12¾% notes due 2018 were up ¾ point to 71¾ on “a half-dozen trades,” a trader said.

Hertz Corp.’s 5½% notes due 2024 were up 5/8 point to 87¾, a trader said.

Deerfield, Ill.-based fertilizer manufacturer CF Industries Holdings, Inc.’s 5 3/8% notes due 2044 were up ½ point to 83½.

And children’s retailer Gymboree Corp. saw a steep decline in its 9 1/8% notes due 2018, which were down 3 points to 42, a market source said.

Paladin on the brink

Paladin Energy Ltd.’s convertibles got a boost on Tuesday, as it was reported that the uranium producer could be forced into bankruptcy.

A market source placed the 7% convertible senior unsecured notes due 2020 at 55, a gain of 7 points outright. The 6% convertible senior notes coming due April 30 were up 5 points at 59.

The Toronto-listed stock was steady at C$0.09.

Paladin has been struggling as uranium prices have stalled.

With $212 million of the 6% convertibles coming due this year and another $20 million of interest payments, the company’s paltry $27.6 million of cash on hand won’t be enough to weather the storm.

Still, Paladin has made an effort, attempting to sell non-core assets, as well as stakes in certain projects. But that has hit a snag as well, as Electricite de France now wants more collateral for the $200 million prepayment it gave the company on a contract that spans until 2024.

Caroline Salls and Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
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