L Brands notes decline on asset sale uncertainty; PG&E active as CEO eyes departure

By James McCandless

San Antonio, April 22 – The distressed debt market saw shifting ground in the retail space on Wednesday.

L Brands, Inc.’s notes dipped after reports indicated that the proposed buyer of its Victoria’s Secret brand sought to terminate the deal.

Sector peer Revlon, Inc.’s issues saw weakness after receiving a ratings downgrade.

Meanwhile, utilities name PG&E Corp.’s paper was active but unchanged after the chief executive officer announced his eventual retirement.

A modest recovery for oil futures was mirrored by Occidental Petroleum Corp.’s and Antero Resources Corp.’s notes while Oceaneering International, Inc.’s issues varied.

Elsewhere, Hertz Global Holdings, Inc.’s paper extended a negative run in the wake of announcing 10,000 layoffs.

Telecom name Frontier Communications Corp.’s notes trailed while Intelsat SA’s issues diverged.

L Brands heads lower

L Brands’ notes experienced a dip by the end of the day, traders said.

The 6 7/8% senior notes due 2035 fell 5¾ points to close at 68½ bid. The 6 5/8% senior notes due 2021 declined by 5½ points to close at 85 bid.

During the Wednesday session, news broke that the prospective buyer of the Columbus, Ohio-based retail company’s majority share in its Victoria’s Secret segment is trying to terminate the deal.

Outlining its reasons for wanting to nix the agreement, private equity firm Sycamore Partners said that the company’s value has been reduced by its failure to pay rent and its furloughing of its retail workers, arguing that the Covid-19 pandemic is not a sufficient defense.

L Brands has called the move “invalid” and committed to defend the transaction in court.

“If it does get terminated, they won’t get another good offer for a while,” a trader said. “Nobody wants to buy anything right now. So they’ll get significantly lower bids if they try anything now.”

In February, Sycamore Partners agreed to acquire a 55% stake in the lingerie brand for about $525 million.

The name temporarily shuttered its retail locations and furloughed staff in March to fall in line with government mandates on non-essential business closures and social distancing.

Revlon weaker

Sector peer Revlon’s issues saw weakness during the session, market sources said.

The 5¾% senior notes due 2021 chalked off 4 points to close at 52½ bid. The 6¼% senior notes due 2024 were docked 3 points to close at 19 bid.

The New York-based cosmetics producer received a ratings downgrade from S&P Global Ratings in the middle of the afternoon.

The agency downgraded all of the company’s ratings to CC from CCC- and affirmed a negative outlook.

S&P cited the company’s recent move to seek a recapitalization transaction to extend its $1.8 billion term loan, term out its $200 million unrated term loan and improve its liquidity.

The agency believes that the completion of the transaction would be tantamount to a default on the 2016 term loan.

Negative headlines of disagreements over the term loan also dogged the company.

Last Tuesday, subsidiary Revlon Consumer Products Corp. started an offering for an $850 million senior secured first-lien term loan due June 30, 2025.

PG&E active, flat

Meanwhile, utilities provider PG&E’s paper was active but ultimately unchanged, traders said.

The 6.05% notes due 2034 held level at 110½ bid.

On Wednesday morning, the San Francisco-based bankrupt electric utility announced that CEO William Johnson would retire from the position on June 30, the company’s target for its bankruptcy exit.

After his departure, board member William Smith will assume the role on an interim basis while a search is conducted for a permanent replacement.

Johnson was appointed to the position in April 2019 to oversee the utility’s Chapter 11 bankruptcy process, which started in January 2019 after recent wildfires had saddled it with more than $30 million in potential liabilities.

The company recently began to solicit stakeholder votes for its reorganization plan, which holds the support of a majority of its creditors and wildfire victims.

Oil rises

As oil futures made a modest recovery, distressed energy names trended higher, market sources said.

West Texas Intermediate crude oil futures for June delivery added $2.21 to settle the day at $13.78 per barrel.

North Sea Brent crude oil futures for June delivery finished at $20.37 per barrel after a $1.04 pickup.

Houston-based independent oil and gas producer Occidental Petroleum’s notes gained ground.

The 2.9% senior notes due 2024 rose 2¾ points to close at 68½ bid. The 2.7% senior notes due 2022 garnered 3½ points to close at 80½ bid.

Denver-based producer Antero Resources’ issues also followed the trend.

The 5 5/8% senior notes due 2023 jumped up 6 points to close at 51½ bid. The 5% senior notes due 2025 added ½ point to close at 48 bid.

Houston-based oil and gas engineering name Oceaneering International’s paper saw varied movements.

The 4.65% senior paper due 2024 shaved off ¾ point to close at 54 bid. The 6% senior notes due 2028 tacked on 1 point to close at 53 bid.

Hertz negative

Elsewhere, car rental services provider Hertz’s notes extended a run of negativity, traders said.

The 6¼% senior notes due 2022 dived 7½ points to close at 34½ bid. The 5½% senior notes due 2024 declined by 5¾ points to close at 30 bid.

On Tuesday, the 6¼% notes shed 2 points and the 5½% notes dropped 9¼ points.

The Estero, Fla.-based car rental company’s structure has seen two straight days of negativity after announcing late Monday that it would lay off 10,000 employees as a result of economic weakness.

As travel has been significantly curtailed during the coronavirus pandemic, companies like Hertz have been seeking government financial rescue packages to ensure their operation.

The company said that it would see about $30 million in employee termination costs as a result of the decision.

Frontier notes trail

The telecom sector saw Frontier’s issues trail throughout the session, market sources said.

The 10½% senior notes due 2022 slipped 1 point to close at 32 bid. The 11% senior notes due 2025 shed 1 point to close at 31 bid.

The Norwalk, Conn.-based wireline communications company’s issues have remained active in distressed trading after last week’s Chapter 11 bankruptcy filing.

After reaching an agreement with creditors, the name hopes to exit the bankruptcy process with 10 billion less debt.

Luxembourg-based satellite operator Intelsat’s paper diverged.

Intelsat Jackson Holdings SA’s 8% notes due 2024 picked up ¼ point to close at 102¼ bid. The 9½% senior notes due 2023 lopped off 1 point to close at 27 bid.

© 2015 Prospect News.
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