Commodity-linked paper boosted post-Fed; AMD firms on potential Intel deal; Intelsat bonds slip

By Stephanie N. Rotondo

Seattle, March 17 – The distressed debt market was generally firmer Thursday, as the broader markets posted gains as well.

The gains were attributed to the Federal Reserve’s decision on Wednesday to maintain interest rates in a 0.25% to 0.5% range, as well as a revised forecast of fewer increases over the course of the year. The news resulted in a weaker dollar in Thursday trading, which helped commodities – including oil – surge in price.

The rally in commodity prices then boosted distressed energy and mining names.

Away from commodity-linked issues, Advanced Micro Devices Inc. paper was also gaining ground as rumors swirled about a potential licensing agreement with Intel Corp.

“AMD was up a bunch,” a trader said.

While the market overall was pushing higher, Intelsat SA bonds were drifting down. The weakness came as Bloomberg reported that the company was in talks with bondholders regarding a debt swap and cash injection.

The news outlet also said that Intelsat’s previously reported plans to amend its credit facility had fallen through.

Commodity issues rise

After the Fed held rates steady on Wednesday – and also indicated that only two increases would likely occur this year, down from previous forecasts of four upward revisions – commodity prices got a boost as the dollar declined.

Domestic crude oil, for its part, added nearly 4% for the day, trading north of $41 a barrel. Copper meantime rose almost 2.5%.

In the oil and gas arena, Latin American-focused Pacific Exploration & Production Corp. saw its 5 1/8% notes due 2025 jumping 4½ points to 20, according to a trader.

In addition to the rising price of oil, the company was also benefitting from news out late Wednesday. The Wall Street Journal reported that the company was considering six buyout offers as it looks at ways to stave off a bankruptcy filing.

A decision is expected to come by the end of the week.

Meanwhile, Whiting Petroleum Corp.’s 5% notes due 2019 ran up 3 points to 71¼, according to a trader.

In the mining space, a trader saw Teck Resources Ltd.’s 6¼% notes due 2041 putting on 2½ points to end at 61. The 2½% notes due 2018 pushed up a point to 87½, the trader said.

Freeport-McMoRan Inc. bonds were also better, with the 3.55% notes due 2022 rising almost 2 points to 76¼ and the 4.55% notes due 2024 gaining 1½ points to close at 75.

AMD powers up

Advanced Micro Devices’ debt shot up Thursday after Bloomberg reported that Intel was considering licensing graphics technology from the troubled computer company.

One trader said the bonds were up 7 to 8 points on the day, pegging the 7¾% notes due 2020 “around 76.” He placed the 6¾% notes due 2019 at 82.

Another trader saw the 7¾% notes ending at 76½, a gain of 5½ points.

Yet another market source deemed the 7½% notes due 2020 6 points higher at 74½ bid.

Though details of the rumored licensing deal were not available – or confirmed – analysts have already been commenting on how such a partnership could benefit Sunnyvale, Calif.-based AMD. Specifically, a large cash payment could help the company deal with its $2 billion debtload – a burden that has pressured the bottom line.

Intelsat declines

Intelsat is reportedly working with bondholders on a proposed debt swap, Bloomberg said Thursday.

However, the article also indicated that a proposed amendment on the company’s credit facility was a no-go. Hope that the amendment would go through had been given as the reason for a recent steady climb in the company’s debt.

The bonds gave way on the latest news, trading “a little bit weaker,” according to a trader.

The trader saw the “luxco” bonds – such as the 8 1/8% notes due 2023 – trading around 26½. The 7¼% notes due 2020 were between 67½ and 68, he said.

At another desk, a trader said the 7¼% notes fell over a point to 67¾, while the 6 5/8% notes due 2022 dipped a point to 57½.

On Feb. 29, Intelsat said it was seeking permission to permit second-lien pledges by the parent organization, Intelsat (Luxembourg) SA, over the capital stock of Intelsat Jackson and technical changes confirming its existing ability to refinance term loans with other first-lien debt.

The proposed amendment also outlined that if Intelsat Jackson raises at least $450 million of gross cash proceeds of first-lien debt, the revolving credit commitment will be reduced to $350 million.

Talks apparently broke down, and a deadline to get such a deal done expired on Friday. Before breaking down, Intelsat was said to have offered creditors 50 basis points and about $8 million on the loans.

Intelsat is a Luxembourg-based provider of satellite services.

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