McDermott better on asset sale talk; PG&E paper rises amid dueling reorganization plans

By James McCandless

San Antonio, Sept. 20 – Wrapping up the week, the distressed market continued to focus on the newsmakers of recent days.

McDermott International, Inc.’s notes fared better after the company announced a potential asset sale and hired another restructuring adviser.

Sector peer California Resources Corp.’s issues varied in direction as the company quelled rumors of a restructure.

A negative day for oil futures was reflected in Valaris plc’s paper while Whiting Petroleum Corp.’s notes diverged.

Elsewhere, PG&E Corp.’s issues were on the rise after a group of creditors and wildfire victims said it has its own reorganization plan for the name.

Telecom name Frontier Communications Corp.’s paper shifted lower as the company prepares to present a restructuring plan to creditors.

Pharma names Teva Pharmaceutical Industries Ltd. and Endo International plc finished weaker.

Meanwhile, dairy producer Dean Foods Co.’s issues went negative.

McDermott better

McDermott’s notes fared better by the end of the Friday session, traders said.

The 10 5/8% senior notes due 2024 jumped up 12 points to close at 28½ bid.

The notes outpaced the rest of the market with about $168 million on the tape by the close.

In the last two trading days, the notes cratered 52 points after news broke that the Houston-based oil and gas engineering name had hired AlixPartners LLP to serve as turnaround advisers.

Early Friday, the company said that it had received interest for one of its subsidiaries specializing in energy technology for $2.5 billion.

A portion of the sale would cut its $4.3 billion debt load.

The company said that it had hired more advisers to facilitate a turnaround on its balance sheet, with an asset sale on the table as a viable way to reduce its debt.

“I don’t think it can return to where it was trading before, at least not in the short term,” a trader said. “I would say it hits the 50 context and trades there by the end of the year.”

Before diving, the senior notes had traded in the low 70s context.

The shift resulted in downgrades from Moody’s Investors Service, which placed any rating it did not already lower up for review.

California Resources varies

Sector peer California Resources’ issues varied in direction, market sources said.

The 6% senior notes due 2024 went unchanged to close at 40½ bid. The 8% senior secured notes due 2022 shot up 8 points to close at 58 bid.

The 8% notes saw about $71 million trading.

After unconfirmed reports of a restructure on Thursday, the Los Angeles-based independent oil and gas producer asserted that the reports were false.

Instead, the company plans to continue its focus on asset sales and other ways to reduce debt.

Oil futures down

Oil futures saw small losses as distressed energy names were under pressure, traders said.

West Texas Intermediate crude oil futures for October delivery gave back 4 cents to cap off the week at $58.09 per barrel.

North Sea Brent crude oil futures for November delivery ended at $64.28 per barrel after a 12-cent dip.

London-based contract driller Valaris’ paper followed the sector trend.

The 5.2% senior paper due 2025 fell 2 points to close at 62 bid. The 7¾% senior paper due 2026 declined by 1¼ points to close at 64¾ bid.

Denver-based producer Whiting Petroleum’s notes diverged.

The 6¼% senior notes due 2023, while being pushed lower to 83¼ bid, closed level at 84 bid. The 6 5/8% senior notes due 2026 improved by 1 point to close at 77½ bid.

PG&E rises

In utilities, PG&E’s issues were on the rise, market sources said.

The 6.05% notes due 2034 garnered 2 points to close at 112¼ bid.

About $54 million of the notes changed hands by the end of the day.

Late Thursday, unsecured creditors for the San Francisco-based bankrupt electric utility and a wildfire victim committee said that they filed their own reorganization plan in bankruptcy court.

The plan calls for the company to pay out a $24 billion settlement to those affected by 2017 and 2018 wildfires, more than proposed in the company’s own plan.

The name has already paid out $11 billion in insurance subrogation claims and plans to cap victim payouts at $8.4 billion.

At this point, the company has retained sole control of its reorganization process, fighting off a previous effort in recent weeks.

“There’s always a chance that the judge might like the deal and entertain it,” a trader said.

A hearing is set for Oct. 6 on whether to accept the plan or not.

Frontier lower

Telecom name Frontier’s paper shifted lower, traders said.

The 10½% senior paper due 2022 lost 1 point to close at 48¼ bid. The 11% senior paper due 2025 shaved off ½ point to close at 47½ bid.

News broke on Friday that the Norwalk, Conn.-based wireline communications name plans to offer a restructuring plan to creditors for approval.

The plan would focus on cutting the company’s $17 billion in debt.

“I don’t see how they do this without filing,” a trader said. “Unless they can get everyone to agree, which would be difficult. But they will try because they want this done as cleanly as possible.”

A creditor group had previously warned the name that a bankruptcy filing would not be in the best interest of stakeholders.

After some speculation, the company announced earlier in the week that it would be making $320 million in debt payments.

Teva, Endo weaker

In pharma, Teva’s notes finished Friday weaker, market sources said.

The 3.15% senior notes due 2026 dropped 1 point to close at 71¾ bid. The 2.8% senior notes due 2023 fell ½ point to close at 83 bid.

The Petach Tikva, Israel-based generic drug producer has seen continual market scrutiny as the sector experiences turmoil over its role in the opioid epidemic.

Several names involved in opioid production face thousands of lawsuits across the country, leading competitor Purdue Pharma to declare bankruptcy after agreeing to a blanket settlement worth billions.

Dublin-based drug maker Endo’s issues also declined.

The 6% senior notes due 2023 shed 2½ points to close at 61½ bid.

Dean Foods negative

Dairy name Dean Foods’ paper saw a negative trend, traders said.

The 6½% senior notes due 2023 shaved off ¾ point to close at 50¼ bid.

About $13 million of the notes ended up on the tape.

The Dallas-based dairy producer’s structure has seen higher trading levels since announcing that it would enact a new operating plan without entertaining a sale of the company.

© 2015 Prospect News.
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