Shortened day caps quiet pre-holiday week; Peabody moves on restructuring plan; iHeart sees slight moves

By Colin Hanner

Chicago, Dec. 23 – A shortened trading day on Friday closed out a rather quiet week in the distressed market, as volume and activity was sluggish aside from some company-specific news before the weekend.

“There’s not a lot to talk about,” a trader said. “It’s a snoozer of a day. I think you have very limited coverage of people sitting in their seats.”

Markets closed at 2 p.m. on Friday in lieu of the Christmas holiday, and several traders were out as a result.

Yet, the attention that was in the distressed market seemed to be directed at Peabody Energy Corp., a trader said, following the St. Louis coal company’s reorganization filing late on Thursday evening.

Its second-lien and unsecured securities were mixed toward the end of close on Friday.

Seeing limited action and movement compared to days past were iHeartCommunications, Inc.’s distressed notes, though more distressing news from bondholders came to light early Friday in a story from Bloomberg, spurring potential implications for the media company.

Some one-off names traded with low volume during the day, making modest moves in either direction.

Peabody mixed after plan

Late Thursday, Peabody Energy Corp. filed a reorganization and related disclosure statement with the U.S. Bankruptcy Court for the Eastern District of Missouri.

Under the plan, holders of first-lien lender claims will be paid in full in cash, including interest at the default rate, or, to the extent the company does not receive a commitment for at least $1.5 billion in exit financing, a replacement secured first-lien term loan and cash.

Holders of second-lien notes claims will receive, at the option of the Peabody debtors, a share of $450 million in any combination of cash, additional first-lien debtor or new second-lien notes, a share of a common stock split and a share of a rights offering equity rights split.

Those 10% notes due 2022 were trading as high as 96 before heading back down to a 94-zip code, a trader said, up 1¼ points on the session.

Holders of general unsecured claims against encumbered debtors will receive a share of the common stock split and the rights offering equity rights split.

A trader said the 6½% notes due 2020 were up 1 point to 69 in early-day trading before settling around a 66½-67 handle, down 1 to 1½ points.

A market source quoted the notes with a 68½ handle mid-morning, up ½ point from previous levels.

Peabody’s restructuring plan, which leaves out convertible and equity shareholders from the recovery, will probably be contested by the two excluded groups, the trader said, possibly resulting in a different version than the one presented on Thursday, and movement on Friday was a knee-jerk reaction to the news.

“The [distressed securities] are trading off on the configuration of the plan right now,” the trader said.

iHeart activity mild

After a disruptive week for iHeartCommunications, Inc. – particularly in the failure to pay decision handed down by the International Swaps and Derivatives Association for the company’s decision to skip the payment of $57.1 million for its 5½% senior notes – activity slowed for the media company, mirroring the rest of the market.

The 14% notes due 2021 – the “most active” distressed securities on Thursday, according to one trader – were quiet on Friday’s session, down ¼ to ¾ point to a 38½ to 38¾ handle, a market source said.

And the 10% notes due 2018 were unchanged at 74¼. On Wednesday, iHeart began a private offering of 11¼% priority guaranteed notes due 2021 in exchange for its $347,028,000 of outstanding 10% senior notes due 2018.

On Friday, a report from Bloomberg said half the holders of the $347 million of bonds may have been up in the air when they decided to oppose a debt exchange offer from iHeartCommunications in the coming weeks, according to sources close to the matter.

Handful of trades

Activity remained low for some one-off names in the distressed market in preparation for the extended holiday weekend and the short week ahead. Volume was particularly sparse.

Community Health Systems Inc.’s 8% notes due 2019 were ¼ point higher to 82¼.

Children’s retailer Gymboree Corp.’s 9 1/8% notes due 2018 remained unchanged with a 46¾ handle on two trades, a market source said.

EP Energy Corp.’s 7¾% notes due 2022 were up ¾ point to 81 on one trade.

Caroline Salls contributed to this review

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