Distressed trading muted; Intelsat weakens; Abengoa debt declines amid insolvency filing

By Stephanie N. Rotondo

Seattle, Nov. 30 – Distressed debt trading was slow-going at month-end, according to market sources.

One trader remarked that overall activity in the high-yield space was somewhat muted, though investment-grade trading seemed busier than not.

Despite the muted trading day, Intelsat SA’s bonds remained active, a trader reported.

The trader said bonds were weaker on the day, as has been the case since the company reported earnings in late October.

Perhaps the biggest loser of the day was Abengoa SA. The Seville, Spain-based renewable energy company said it filed for insolvency in Spain on Nov. 25. That news came out prior to the holiday weekend, but the company’s debt was tanking now that investors have had a chance to digest the news.

As for the oil and gas space, Chesapeake Energy Corp.’s 4 7/8% notes due 2022 were deemed half a point better at 42½. California Resources Corp.’s 5½% notes due 2021 meantime put on “about 3 points from before Thanksgiving,” a trader said, ending at 59 5/8.

The gains came as the company announced that it had increased the size of its previously announced exchange offer to $2.81 billion from $1 billion.

The early tender deadline was also extended to 5 p.m. ET on Dec. 1 from 5 p.m. ET on Nov. 25.

As of the original early deadline, a total of $3.92 billion notes – including the 6% notes due 2024 and the 5% notes due 2020, as well as the 5½% notes – had been tendered for exchange.

Intelsat still busy

Intelsat debt continued to be actively traded, a trader said Monday.

The bonds also remained weak, he said.

The trader saw the 7¾% notes due 2021 slipping a point to 40. The 6¾% notes due 2018 meantime dropped 6 points to 65.

The name has been trading actively since the Luxembourg-based satellite provider reported earnings on Oct. 29. Though the earnings beat expectations, the company ended the third quarter with nearly $15 billion in debt.

For the quarter, Intelsat reported net income of $78 million, or 66 cents per share, on revenue of $580.8 million.

Revenue was down about 4.5% year over year.

Immediately after the quarterly results came out, the 7¾% notes improved a bit and were seen trading in the low-60s. The next day, the paper began to dwindle.

Abengoa sinks

Abengoa bonds were also sliding Monday, as investors reacted to the company’s recent insolvency filing in Spain.

A trader said the 7¾% notes due 2020 dipped a point to 15½. The 8 7/8% notes due 2017 closed at 16, he said, which was down from levels around 46 pre-Thanksgiving.

Abengoa’s foray into creditor protections came after Gonvarri Corporacion Financiera withdrew its offer to inject €250 million of new capital into the company. The investment would have made Gonvarri the largest single shareholder of Abengoa.

On the news, both Moody’s Investors Service and Standard & Poor’s took negative action on the company’s credit ratings.

Moody’s dropped its corporate family and senior unsecured ratings to Caa2 from B3. S&P cut its corporate credit senior unsecured ratings to CCC- from B+.

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