PG&E lower amid state settlement news; California Resources drops as fracking halted

By James McCandless

San Antonio, Nov. 19 – Tuesday’s distressed debt session moved on newsmakers in the utilities, energy and telecom sectors.

PG&E Corp.’s notes finished under pressure as the company comes close to finalizing a settlement with state regulators over equipment failures.

In oil and gas, California Resources Corp.’s issues dropped after California halted approvals of new fracking operations permits.

As crude oil futures slid, Chesapeake Energy Corp.’s, Valaris plc’s and Whiting Petroleum Corp.’s paper saw similar movements.

Meanwhile, in telecom, Intelsat SA’s notes continued to slide after Federal Communications Commission officials committed to holding a public C-band spectrum auction.

Sector peer Frontier Communications Corp.’s issues varied after a ratings downgrade.

Pharma name Teva Pharmaceutical Industries Ltd.’s paper diverged ahead of $1 billion and €1 billion of new notes from the issuer.

Coworking company WeWork Cos. Inc.’s notes gained despite headlines of inquiries by multiple agencies and impending layoffs.

PG&E lower

PG&E’s notes ended the day under pressure, traders said.

The 6.05% notes due 2034 shaved off ½ point to close at 101 bid.

At the close, the notes saw about $33 million trading.

News broke on Tuesday that the San Francisco-based bankrupt electric utility is close to finalizing a settlement with California regulators for allegedly failing to maintain equipment that allegedly sparked 2017 wildfires in the state.

The company would pay $1.7 billion to settle the claims.

It is also facing pressure to close a $4.6 billion funding gap that would support its restructuring efforts, reporting $7.4 billion in hand so far.

Talks between the company and stakeholders over a compromise restructuring plan are ongoing, though pressure has been put on them by California governor Gavin Newsom to reach a deal quickly or face a state takeover.

CalRes drops

In the oil and gas sector, California Resources’ issues dropped, market sources said.

The 6% senior notes due 2024 shed 7 points to close at 19 bid. The 8% senior notes due 2022 dived 8 points to close at 28½ bid.

The Los Angeles-based independent oil and gas producer’s structure saw losses after Newsom announced a halt of new fracking permits within California, with orders for state regulators to assess the safety of the process, high-pressure steamflooding and similar practices.

The move comes after a leak at a Chevron facility.

“I think the levels the bonds are at now are where they will be at the end of the year,” a trader said. “This definitely hurts names like CalRes, who are already struggling.”

Oil names slide

A slide in oil futures led to similar movements from distressed energy tranches, traders said.

Market worries of oversupply in the energy sector led to losses for oil futures.

West Texas Intermediate crude oil futures for December delivery moved down $1.84 to settle the day at $55.21 per barrel.

North Sea Brent crude oil futures for January delivery finished at $60.91 per barrel after a $1.53 loss.

Oklahoma City-based Chesapeake Energy’s paper followed the sector trend.

The 8% senior notes due 2025 lost 2½ points to close at 59 bid. The 8% senior paper due 2027 moved down 3 points to close at 55 bid.

London-based contract driller Valaris’ notes traded down.

The 5.2% senior notes due 2025 gave back 3¾ points to close at 44 bid. The 7¾% senior notes due 2026 lopped off ½ point to close at 47 bid.

Denver-based producer Whiting Petroleum’s issues moved on a similar route.

The 6¼% senior notes due 2023 lost 2 points to close at 71 bid. The 6 5/8% senior notes due 2026 declined by 3¼ points to close at 58¾ bid.

Intelsat slides

Meanwhile, in telecom, Intelsat’s paper slid again, market sources said.

Intelsat (Luxembourg) SA’s 8 1/8% senior paper due 2023 crashed 9 points to close at 52¾ bid. Intelsat Jackson Holdings SA’s 8½ senior paper due 2024 fell 5 points to close at 86 bid.

On Monday, the 8 1/8% notes dropped 9 points.

The two tranches combined to see about $230 million trading.

Over the last week, the Luxembourg-based satellite operator’s paper has seen a continuous drop after FCC chairman Ajit Pai announced his plan to hold a public auction for access to C-band spectrum, or 5G.

The company, as part of a group called the C-Band Alliance, has pushed for a private auction between three companies for months, recently asserting that it would pay a portion of the proceeds to the U.S. government.

Frontier varies

Sector peer Frontier’s notes varied in direction throughout the day, traders said.

The 10½% senior notes due 2022 added ¾ point to close at 44¼ bid. The 11% senior notes due 2025 held level at 44 bid.

Early Tuesday, S&P Global Ratings issued a downgrade for the Norwalk, Conn.-based wireline communications name.

The agency lowered the company’s overall rating to CCC- from CCC, citing the recent $499 million drawdown of the company’s revolving credit facility, which fully tapped the $850 million facility.

The company said that the move signals the likelihood of a distressed exchange or bankruptcy filing within the next six months.

Teva diverges

Pharmaceutical name Teva’s issues diverged, market sources said.

The 6¾% senior notes due 2028 picked up 1½ points to close at 96 bid. The 3.15% senior notes due 2026 lost 1¾ points to close at 79¾ bid.

After the close on Tuesday, in a highly anticipated pricing, the Petah Tikva, Israel-based generic drug producer priced approximately $2.1 billion equivalent of long five-year senior bullet notes in two upsized tranches, Prospect News reported.

The company priced an upsized $1 billion amount of notes at par to yield 7 1/8%, which was originally pegged at $750 million.

“I think it’s going to straddle par initially,” a trader said after the close and before news of the pricing.

Teva also sold an upsized €1 billion issue of notes at par to yield 6%.

WeWork up

Elsewhere, WeWork’s paper saw a positive shift, traders said.

The 7 7/8% senior notes due 2025 gained 1 point to close at 72 bid.

The New York-based coworking company saw more negative headlines on Tuesday after news broke that the New York State Attorney General’s office has opened an investigation into WeWork, focusing on the action of former chief executive officer Adam Neumann in the run-up to WeWork’s botched initial public offering.

The company is preparing to lay off at least 4,000 workers after a decreased valuation led to an $8 billion rescue package from SoftBank, its largest investor.

© 2015 Prospect News.
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