PG&E notes decline as company incurs $10.5 billion charge; Digicel issues fall as covenants are eased

By James McCandless

San Antonio, Feb. 28 – More earnings reports took up much of the distressed market’s attention in the Thursday session.

PG&E Corp.’s notes declined after the company recorded a $10.5 billion charge related to California wildfires in late 2018.

Meanwhile, Digicel Group Ltd.’s issues were also falling after the company disclosed that lenders agreed to ease its leverage covenant.

Domestic peer Frontier Communications Corp.’s paper saw mixed activity.

Retailer J.C. Penney Co., Inc.’s notes rose after the company reported positive earnings for the fourth quarter.

Sector peer L Brands, Inc.’s issues were mixed after the company reported weak quarterly sales highlighted by its Victoria’s Secret segment.

In oil and gas, California Resources Corp.’s paper shot up after a surprisingly strong earnings report.

Ensco plc’s issues were mixed after the company released its Q4 report, with the market focused on its declining revenues.

Dean Foods Co.’s notes saw a slight gain in trading as the company received a ratings downgrade.

Community Health Systems, Inc.’s issues climbed as the company prices new notes.

PG&E declines

PG&E’s notes were heading lower on Thursday, traders said.

The 6.05% notes due 2034 dropped ¾ point to close at 91 bid.

Early Thursday, the San Francisco-based bankrupt electric utility released its fourth-quarter earnings report.

It showed a profit of 80 cents per share, beating analyst estimates of 62 cents per share.

Revenues were underwhelming at about $4 billion.

The company also incurred an accounting charge of $10.5 billion related to the Camp Fire that spread in California in late 2018.

It also indicated that the likelihood of one of its transmission lines causing the wildfire was “probable.”

Digicel falls

Elsewhere, in the telecom space, Digicel’s issues were falling, market sources said.

The 6% notes due 2021 lost 5½ points to close at 82 bid. The 6¾% notes due 2023 also shaved off 5½ points to close at 69 bid.

In its lackluster Q4 earnings report, the Kingston, Jamaica-based mobile network provider announced that its lenders have eased their leverage covenant in order to avoid a breach.

The company reported $554 million in revenues, a decline compared to the same time the previous year.

“Their liquidity is shrinking,” a trader said. “Their revenues are down 4%, which means they’re hanging on. I would say they are going to need to restructure in the next six months.”

Frontier mixed

Domestic sector peer Frontier’s paper was mixed, traders said.

The 7 5/8% paper due 2024 picked up 3¾ points to close at 61¼ bid. The 10½% paper due 2022 lost ½ point to close at 72 bid. The 11% paper due 2025 shed 1 point to close at 64 bid.

Late Tuesday, the Norwalk, Conn.-based wireline telecom company issued a mixed earnings report.

Reporting a loss of 6 cents per share, it fell short of a 4 cents per share loss that had been the analyst consensus.

However, lower costs and rising subscriber numbers led to $2.12 billion in revenues.

J.C. Penney up

Meanwhile, in retail, J.C. Penney’s notes shot up, market sources said.

The 5 7/8% notes due 2023 tacked on 2¾ points to close at 85¾ bid.

On Thursday morning, the Plano, Texas-based department store chain surprised traders with its fourth-quarter earnings report.

The company reported an 18 cents per share profit versus analyst estimates of an 11 cents per share profit.

Despite the positive topline, it also showed total net sales of $3.67 billion, a 9.5% decrease from the same period a year before.

“It’s more reactionary than anything,” a trader said. “They’re still in trouble like all the rest of the big retailers. They just had a slightly positive quarter.”

L Brands mixed

Elsewhere in retail, L Brands’ issues ended the session mixed, traders said.

The 6¾% notes due 2036 lost ¼ point to close at 84¼ bid. The 5¼% notes due 2028, while moving up to 89 bid during the day, settled back down at Wednesday’s level of 86¾ bid, according to Trace data.

The Columbus, Ohio-based retailer posted its fourth-quarter figures after the close on Wednesday, yielding mixed results.

On the positive side, it reported earnings of $2.14 per share, beating estimates of a $2.07 per share profit.

On the other side of the coin, despite showing a slight rise in sales at $4.85 billion, the company reported a 5% drop in sales in its Victoria’s Secret segment.

As a result, it will shutter 53 Victoria’s Secret stores before the year is out.

CalRes sees boost

In the oil and gas space, California Resources’ paper saw a boost, market sources said.

The 6% paper due 2024 added 4¼ points to close at 74¼ bid. The 8% paper due 2022 picked up ¼ point to close at 81 bid.

The Los Angeles-based independent oil and gas producer also released its Q4 earnings report, posting after the close on Wednesday.

The company reported a 53 cents per share profit for the quarter, far surpassing analyst predictions of a 2 cents per share profit.

Accompanying the figure was the 8% increase in production volume against the same period last year.

“One hitch here is their cash flow,” a trader said. “It’s in a pretty bad spot and if they don’t get more cash in this quarter might be seen as a fluke.”

Ensco mixed

Ensco, another energy name, saw its notes end mixed, traders said.

The 7¾% notes due 2026 lost 3¼ points to close at 84 bid. The 7.2% notes due 2027 gained ½ point to close at 85½ bid.

Late Wednesday, the London-based contract driller issued its Q4 report.

It posted a loss per share of 47 cents, wider than the expected 37 cents per share loss.

A negative picture was also drawn from declining revenues.

Last week, the company gained shareholder approval to merge with sector peer Rowan.

Dean better

Dean Foods’ issues saw a slightly better day, market sources said.

The 6½% notes due 2023 edged up ¼ point to close at 75 bid.

On Wednesday, the 6½% notes dropped 4¾ points.

Moody’s Investors Services issued downgrades for the company’s corporate family rating, probability of default rating and its senior unsecured notes rating on Thursday.

The move comes the day after the company’s poor Q4 report, showing a 50 cents per share loss where analysts predicted a 26 cents per share loss.

Its dividend was suspended the same day.

Community Health climbs

In the healthcare space, Community Health’s paper climbed, traders said.

The 7 1/8% paper due 2020 rose 2 points to close at 94 bid. The 6 7/8% paper due 2022 gained ¼ point to close at 65¾ bid.

On Thursday, the Franklin, Tenn.-based hospital operator raised $1.58 billion of proceeds via the placement of an issue of 8% seven-year senior secured notes, pricing at 98.683 to yield 8¼%, Prospect News reported.

The company announced the offering on Wednesday.

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