American Airlines notes lower after analyst downgrade; AMC eyed as liquidity sought

By James McCandless

San Antonio, Dec. 11 – The distressed debt market spent the Friday session focused on the travel and entertainment spaces.

American Airlines Group Inc.’s notes shifted lower after the company, along with the industry, received an analyst downgrade.

Sector peer United Airlines Holdings, Inc.’s issues were similarly weaker.

In the movie theater space, AMC Entertainment Holdings, Inc.’s paper varied in direction after warning that it could run out of capital by next month.

Theater chain Cinemark Holdings, Inc.’s notes improved.

Elsewhere, propane supplier Ferrellgas Partners, LP’s issues were under pressure as it reaches a support agreement to file for bankruptcy soon.

As oil futures pulled back from recent gains, Occidental Petroleum Corp.’s and Antero Resources Corp.’s paper saw mixed results while Superior Energy Services, Inc.’s notes gained.

Manufacturing company United States Steel Corp.’s issues diverged on the back of a positive ratings change.

Airlines decline

American Airlines’ notes shifted lower at the end of the week, traders said.

The 5% senior notes due 2022 fell 1 point to close at 87 bid. The 11¾% senior notes due 2025 shaved off ½ point to close at 114½ bid.

On Friday morning, the Fort Worth-based air carrier and a group of its industry peers received an analyst downgrade from Deutsche Bank.

An analyst downgraded the company’s common stock to hold from buy, saying that there is not much upside in the sector.

While U.S. airlines could be in for “the greatest demand recovery since World War II in 2021,” the analyst went on to say that investors have already paid for two years of earnings growth based on valuations.

“It will be sluggish for them,” a trader said. “I think we will start to see a meaningful recovery in the summer.”

American Airlines’ capital structure has seen improvements in the last few weeks amid positive headlines about coronavirus vaccine candidates and distribution.

Chicago-based air travel name United Airlines’ issues were similarly weaker after the analyst downgrade.

The 5% senior notes due 2024 were docked 1 point to close at 99¾ bid. The 4¼% senior notes due 2022 shed ¼ point to close at 100½ bid.

AMC varies, Cinemark up

In the movie theater space, AMC’s paper varied in direction, market sources said.

The 12% notes due 2026 shot up 3 points to close at 24½ bid. The 10½% paper due 2025 declined ½ point to close at 70 bid.

In a Friday filing with the Securities and Exchange Commission, the Leawood, Kan.-based theater operator warned that it needs to raise at least $750 million to continue operations and stave off bankruptcy.

AMC said that if it did not meet this capital raise goal that it would run out of money by next month.

Also on Friday, AMC announced that it had secured a commitment to receive $100 million in cash from Mudrick Capital Management on Jan. 15 in the form of first-lien debt financing.

Additionally, Mudrick will convert $100 million of existing company debt into common stock.

As a result, AMC will issue 21,978,022 shares of stock.

AMC has also seen its tranches move positively on the back of vaccine news.

Plano, Tex.-based theater chain Cinemark’s notes improved.

The 5 1/8% senior notes due 2022 added ¼ point to close at 96 bid. The 4 7/8% senior notes due 2023 improved by ¼ point to close at 93 bid.

Ferrellgas edges lower

Elsewhere, propane name Ferrellgas’ issues were under pressure, traders said.

The 6½% senior notes due 2021 trailed by ½ point to close at 97 bid. The 10% notes due 2025 lopped off ½ point to close at 110½ bid.

During Friday activity, the Overland Park, Kan.-based propane distributor and subsidiary Ferrellgas Partners Finance Corp. plan to file pre-packaged Chapter 11 cases in the next several weeks to implement a restructuring with support from a substantial majority of noteholders, Prospect News reported.

As part of the deal, the debt of the company and Ferrellgas Partners Finance will be eliminated, roughly $1.5 billion of debt of Ferrellgas, LP will be refinanced, and over $1 billion of new capital will be raised by Ferrellgas, LP.

Holders of 74% of the outstanding amount of 8 5/8% senior notes due 2020 have consented to the transaction support agreement.

Oil names mixed

As oil futures pulled back from recent gains, distressed energy names saw mixed results, market sources said.

West Texas Intermediate crude oil futures for January delivery chalked off 21 cents to settle at $46.57 per barrel.

North Sea Brent crude oil futures for February delivery finished the week at $49.97 after a 28 cent slip.

Houston-based independent oil and gas producer Occidental Petroleum’s paper moved on separate tracks.

The 2.9% senior notes due 2024 held level to close at 95¾ bid. The 2.7% senior notes due 2022 lost ¼ point to close at 100¾ bid.

Denver-based producer Antero Resources’ notes were also pulled apart.

The 5 5/8% senior notes due 2023 moved up 1¼ points to close at 95½ bid. The 5% senior notes due 2025 dropped ¼ point to close at 86¾ bid.

Houston-based oilfield services provider Superior Energy’s issues spent the day gaining.

The 7 1/8% senior notes due 2021 grabbed 2 points to close at 31 bid. The 7¾% senior notes due 2024 added 2¼ points to close at 31¼ bid.

U.S. Steel diverges

Manufacturing company U.S. Steel’s paper diverged by the end of the afternoon, traders said.

The 6.65% senior notes due 2037 tacked on ¼ point to close at 86¾ bid. The 6¼% senior paper due 2026 fell 1¼ points to close at 92¾ bid.

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