Sprint bonds swoon as T-Mobile talks end; energy names climb as crude soars; Frontier steadies after slide

By Paul Deckelman

New York, Nov 6 – Traders said that the “disaster of the day,” as one of them called it, was in Sprint Corp. bonds, which nosedived across its capital structure in very active trading, on the news that the wireless communications provider’s merger talks with sector peer T-Mobile came to an abrupt – but not unexpected – end, with no deal accomplished.

On the upside. energy names like California Resources Corp., Denbury Resources Inc. and Sanchez Energy Corp. continued to ride the crest of surging world crude oil prices, which rose for a third consecutive session on Monday.

World oil prices rose on expectations that oil producing countries will agree to extend an output cut at their meeting at the end of this month and got a further boost from data indicating that U.S. oil drilling activity was slowing.

Frontier Communications Corp.’s recently beleaguered bonds appeared to steady on Monday after having taken a pounding last week in the wake of disappointing third-quarter earnings reported by the telecommunications service operator.

Sprint slides as talks end

Players said that Sprint Corp.’s various bonds “got knocked around,” as one put it, after the Overland Park, Kan.-based wireless company said that its merger talks with sector peer T-Mobile had ended with no such combination achieved.

Sprint said the talks had faltered as the two companies failed to reach agreement on pricings and valuations of their various assets.

The two companies “were unable to find mutually acceptable terms,” they said in a joint statement.

“Sprint was down 4 or 5 points across the [capital] structure,” one of the traders said, while noting that T-Mobile’s junk bonds were unchanged.

“Sprint was the one that took it on the chin,” he said.

Another trader saw Sprint’s 6 7/8% notes due 2028 down 5 points on the day, to 103¼ bid, on turnover of more than $44 million.

He said its 7 7/8% notes due 2023 lost 3½ points to end at 109¼ bid, while its 8¾ w notes due 2032 plummeted by 6 points on the session to around 117 bid.

“Sprint got hit early and often,” he said.

Frontier notes steady

Also in the telecom area, a trader said that Frontier Communications paper – seemingly in freefall since the Stamford, Conn.-based wireline and broadband service provider reported disappointing earnings last week – “had a little bit of a rebound.”

He saw its 11% notes due 2025 firm to 78¾ bid, calling that a gain of more than ½ point, on volume of over $36 million.

The company’s 10½% notes due 2022 were unchanged on the day, at 81¾ bid, with over $15 million of those bonds having traded.

Oil names jump as crude prices soar

A trader said that the oil names “were clearly outperforming the rest of the market,” fueled by a surge in crude oil prices that carried the U.S benchmark grade West Texas Intermediate for December above the $57 per barrel mark.

That shot benchmark issuer California Resources’ 8% notes due 2022 up 2½ points on the day to close at 72 bid, with over $68 million traded, clearly the most of any single credit on the day, a trader pointed out.

A trader said the Los Angeles-based exploration and development company’s paper “went up a few points during the day” – and then went up “a few points more” in after-hours trading estimating a finish around 74 bid.

Among other sector names getting a boost were Plano, Texas-based Denbury Resources’ 5½% notes due 2022, which gained 2½ points to end at 69½ bid, with over $21 million traded.

Houston-based Sanchez Energy’s 6 1/8% notes due 2023 firmed by almost 3 points on the day to 89¼ bid, on “good volume; “ of about $18 million.

The bonds rose as oil saw its third straight gain, with WTI up $1.71 per barrel in New York trading at $57.35, while North Sea Brent crude zoomed to $64.27 a barrel in London, up $2.20 on the session.

Prices jumped amid speculation that OPEC and non-OPEC oil ministers will agree to extend an output cut program when they meet on Nov. 30.

They got a further boost from new data showing a decline oil drilling activity in the U.S., as oilfield services firm Baker Hughes reported that the number of active U.S. rigs drilling for oil fell by eight to 729 last week.

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