FerrellGas notes see bright spot amid sell-off; energy names lower; Westmoreland better

By James McCandless

San Antonio, Oct. 11 – On another day of sell-offs in the equity markets, distressed debt names continued to tumble.

Despite the broad decline, FerrellGas Partners, LP’s notes improved on Thursday on news that the company announced the completion of recent acquisitions.

Elsewhere in energy, uncertainty surrounding Hornbeck Offshore Services, Inc. and whether it can meet its debt obligations spurred declines in its notes and a jump in competitor Navios Maritime Holdings Inc.’s paper.

Oil and gas stalwarts continued to see losses on Thursday, with EP Energy Corp., Sanchez Energy Corp. and California Resources Corp.’s tranches continuing to fall.

Bankrupt Westmoreland Coal Co.’s notes were rising from its lows after its filing and a ratings downgrade.

In the medical space, Community Health Systems, Inc.’s paper declined. After the close, the company announced another hospital sale.

Sears Holdings Corp.’s notes continued to plummet as the market anticipates the company’s bankruptcy. Sector peer PetSmart Inc.’s issues also fell.

FerrellGas gains

FerrellGas notes improved on Wednesday’s gains, traders said.

The 6½% notes due 2021 picked up ¼ point to close at 88¾ bid. The 6¾% notes due 2022 also added ¼ point to close at 87¼ bid.

On Wednesday, the 6½% notes rose 2¼ points and the 6¾% notes also gained 2¼ points.

The company announced Thursday morning that it had completed the acquisitions of Salathe Gas Co. and North Star Exchange Inc., both longtime distributors to the company. The terms of the deal were not disclosed.

“This is what the big deal has been,” a trader said. “They’ve been strengthening over the last week or so.”

The Overland Park, Kan.-based propane supplier’s notes have bounced back from recent lows after a disappointing Sept. 27 earnings report, with the 6½% notes hitting 85¾ bid on Oct. 5.

Energy tanks

The combination of the overall market sell-off and another drop in oil futures led to another anemic day in energy names.

In the offshore space, Hornbeck Offshore’s issues declined, market sources said.

The 5 7/8% notes due 2020 lost about ¼ point to close at 78¾ bid. The 5% notes due 2021 fell ½ point to close at 74½ bid.

Investors are concerned that the Covington, La.-based maritime oil services company will not be able to cover securities that are coming due soon, a market source said.

“The main concern is $90 million in convertibles that they have coming due in 2020,” the source said. “The company has said that they may not have sufficient liquidity to treat those. It looks like people are shorting the 2020 notes.”

Meanwhile, Monaco-based competitor Navios saw its 7 3/8% paper due 2022 jump up about 1¾ points to close at around 80 bid.

Bellwether oil tranches saw another decline across the board, traders said.

Houston-based independent oil and gas producer EP Energy saw its 7¾% notes due 2022 drop 2¼ points to close at 77¾ bid.

Sanchez Energy, another Houston-based producer, saw its 6 1/8% notes due 2023 lose 1 point to close at 56 bid after dropping 1 point on Wednesday.

Los Angeles-based peer California Resources’ paper also weakened.

The 6% notes due 2024 dropped 1 point to close at 87 bid. The 8% notes due 2022 shaved off 4¼ points to end at 93¾ bid.

The energy sector was a large part of Thursday’s sell-off as the Energy Information Agency reported a 6 million barrel increase in the U.S. crude oil supply, surpassing analysts’ expectations.

At the end of the session, West Texas Intermediate crude futures ended lower by $2.20 at $70.97 per barrel. North Sea Brent crude oil futures lost $2.83, ending at $80.26 per barrel.

Westmoreland rebounds

Away from oil and gas, Westmoreland’s paper bounced back from recent lows, market sources said.

The 8¾% paper due 2022 rose 1¾ points to close at 29¼ bid.

On Wednesday, the 8¾% paper lost ½ point.

The Englewood, Colo.-based bankrupt coal producer rose despite a ratings downgrade on Thursday. Moody’s Investors Service lowered the company’s probability of default rating, corporate family rating and all instrument ratings.

“There are some people who think that the paper should be trading in the 40’s,” a trader said.

The company filed for Chapter 11 bankruptcy on Oct. 9, Prospect News reported.

Community Health off

In the medical space, Community Health’s notes also moved lower, traders said.

The 6 7/8% notes due 2022 lost 1 point to close at 54½ bid.

After the close, the Franklin, Tenn.-based hospital operator announced that it has entered into a definitive agreement to sell its two-hospital Mary Black Health System and related businesses to South Carolina-based Spartanburg Regional Healthcare System.

The agreement is part of the company’s continuing debt reduction strategy, having sold several other hospitals in the past year.

Sears spirals

Sears’ paper continued to “shred value,” in the words of a trader.

The 7% bonds due 2032 lost another 3 points to close at 45 bid. The 6½% notes due 2028 fell 5 points to end at 43 bid.

On Wednesday, the 7% bonds lost 4¼ points.

The Hoffman Estates, Ill.-based retailer’s notes have been in freefall after news broke early Wednesday that the company is preparing for bankruptcy.

Maturing on Monday, the company’s 6 5/8% notes lost 12½ points to close at 32 bid.

Additional reports of the company missing vendor payments and lenders pushing for liquidation over a restructure have further depressed the structure.

Elsewhere in the sector, Phoenix-based pet supplies retailer PetSmart’s 5 7/8% paper due 2025 lost ¾ point to close at 80 bid. The 8 7/8% paper due 2025 fell 1¼ points to close at 71½ bid.

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