PG&E lower on wildfire claim ruling; Sanchez Energy notes gain after financing news

By James McCandless

San Antonio, Aug. 19 – The distressed market started the week with much of the trading focus on high-profile names.

PG&E Corp.’s notes ended lower after a bankruptcy judge ruled that wildfire claims against the company could proceed.

In oil and gas, Sanchez Energy Corp.’s issues gained after the company won access to $50 million in debtor-in-possession financing.

Sector peer EP Energy Corp.’s paper saw varied movement after the company received a ratings downgrade.

McDermott International, Inc.’s notes also dipped following a downgrade.

Telecom name Frontier Communications Corp.’s issues moved higher, leading in the sector.

Satellite operator Intelsat SA’s paper diverged on Monday.

In pharma, Teva Pharmaceutical Industries Ltd. and Mallinckrodt plc’s notes spent the session trending upward.

Business software name Exela Technologies, Inc.’s notes continued to trend negative.

PG&E lower

Utilities name PG&E’s longer-term notes ended the session lower, traders said.

The 6.05% notes due 2034 dropped 1¾ points to close at 109½ bid. The 5.8% senior notes due 2037 also declined by 1¾ points to close at 107¼ bid.

The notes saw about $57 million on the tape by the close.

On Friday, the bankruptcy judge overseeing the proceedings for the San Francisco-based electric utility ruled that the company could now face a jury trial for $18 billion in legal claims over a 2017 wildfire.

While the company was cleared of responsibility by investigators, the judge ruled that a jury trial could be heard after victims and insurers claimed to have evidence pointing to PG&E equipment as the cause of the fire.

The company’s common stock plunged 25% in reaction to the news.

Also on Friday, the judge rejected requests from two creditor groups from formally submitting their restructuring proposals, arguing that competing plans would draw out the restructuring process further than necessary.

“There was not a lot going on today, so this outpaced everything else,” a trader said. “It’s just more risk for them, which makes the structure more attractive to distressed guys.”

Sanchez Energy gains

Meanwhile, in oil and gas, Sanchez Energy’s notes gained, market sources said.

The 7¼% notes due 2023 tacked on ¼ point to close at 63¼ bid. The 7¾% senior notes due 2021 added ¼ point to close at 4¼ bid.

The Houston-based bankrupt independent oil and gas producer announced on Friday that it obtained court approval to access $50 million of a proposed $175 million in new-money debtor-in-possession financing on an interim basis, Prospect News reported.

As previously reported, Sanchez said it has received commitments from some of its senior lenders for $175 million in new financing.

Last week, an informal committee of noteholders objected to DIP financing, arguing that their interests were not being taken into consideration.

The company filed for bankruptcy on Aug. 12.

EP Energy varies

Sector peer EP Energy’s paper varied in direction in secondary trading, traders said.

The 8% senior secured paper due 2024 lost 1½ points to close at 48 bid. The 7¾% paper due 2026 rose 1¾ points to close at 85¼ bid.

Monday saw S&P Global Ratings issue a downgrade for the Houston-based energy producer.

The agency cut the company’s rating to CC from CCC- and lowered its senior secured debt rating, affirming a negative outlook.

Last week, the company released its second-quarter earnings report, posting a loss of 15 cents per share and revenues of $256 million.

Triggering the downgrade was an announcement from the company that it would defer an interest payment, entering a 30-day grace period as it holds talks with stakeholders on restructuring.

McDermott dips

McDermott’s notes also saw a dip, market sources said.

The 10 5/8% senior notes due 2024 slid ¾ point to close at 70 bid.

The Houston-based energy construction name was another energy company seeing downgrades on Monday.

Moody’s Investors Service lowered the corporate family and probability of default ratings for McDermott Technology (Americas), Inc.

It also cut issue-level ratings.

Moody’s cited an “increase in costs to complete a number of projects and the lower-than-expected proceeds from asset sales.”

The company’s notes are trading at their lowest levels since their issuance, according to market data.

Frontier up, Intelsat mixed

Elsewhere, telecom name Frontier’s issues moved higher, traders said.

The 10½% senior notes due 2022 gained 1¾ points to close at 53¼ bid. The 11% notes due 2025 garnered 2 points to close at 51 bid.

Recently, the Norwalk, Conn.-based wireline communications company posted a second-quarter profit of 98 cents per share, though its guidance was lowered.

“There wasn’t any news out today on it but it continues to be topical,” a trader said.

Luxembourg-based satellite operator Intelsat’s paper diverged.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 shaved off ¾ point to close at 91½ bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 gained 2 points to close at 81 bid.

Teva, Mallinckrodt rises

In the pharma sector, Teva’s notes were trending upward, market sources said.

The 2.8% senior notes due 2023 improved by ¼ point to close at 81¼ bid. The 3.15% notes due 2026 also added ¼ point to close at 72¾ bid.

While there were no new developments in the Petach Tikva, Israel-based generic drug producer’s space on Monday, the company’s capital structure continues to trade heavily on the back of potential legal challenges.

Staines-Upon-Thames, U.K.-based peer Mallinckrodt’s debt issues also improved.

The 4 7/8% senior notes due 2020 jumped up 2¼ points to close at 88½ bid.

Exela down

Exela’s paper continued to see declines, traders said.

The 10% senior secured paper due 2023 fell ½ point to close at 61½ bid.

On Friday, S&P cut the Irving, Tex.-based business software provider’s overall rating to CCC+ from B- and lowered its senior secured credit facility rating, citing an increased risk of a restructuring in the next 12 months.

The company reported a loss of 22 cents per share for the second quarter.

© 2015 Prospect News.
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