Possible bankruptcy marks uptick for Avaya; Peabody up on coal, possible bankruptcy exit

By Colin Hanner

Chicago, Nov. 28 – Distressed debt trading eased on Monday following an extended holiday weekend, as oil-related bonds returned to a flurry of speculation days before a potential supply cut, and regularly traded distressed names continued to react to mostly news from last week.

“Activity was very muted today following Thanksgiving,” a trader said. “It was a slow, back-to-work day.”

“People were out for multiple days, and now they’re getting off their Thanksgiving hangover,” another trader said. “People are going to start getting their heads back into it.”

Among those actively traded were technology company Avaya Inc., which is reportedly heading toward Chapter 11 protection next month. It saw an uptick in several of its distressed bonds on Monday.

Though trading was lower than usual, Peabody Energy Corp. continued to ride the momentum of rising coal prices that has made the opportunity for an exit out of bankruptcy a reality going forward, according to a report.

Media company iHeartCommunications, Inc. began a consent solicitation in which it is seeking permission to exclude some holders from future consent solicitations, and several of its distressed bonds jumped as a result.

Oil futures rose by several points on signals that Iraq would join efforts with the Organization of Petroleum Exporting Countries on Wednesday to curb an oil glut.

Stone Energy Corp., Weatherford International plc and EP Energy Corp. – which one trader said had the most actively traded notes with 17 trades – saw some upward movement in its notes. GenOn Energy Inc. was down, largely credited to the looming bankruptcy the company continues to face.

Peabody rolls

Last Wednesday, a spokesman from Peabody Energy said that unsecured and secured lenders were close to reaching an agreement for the St. Louis-based coal company’s assets, a Reuters report said.

The spokesman went on to say that Peabody expects to file a reorganization before the new year and exit bankruptcy by April 2017, within a year of filing for bankruptcy.

A market source said its 6½% notes due 2020 were up 2¼ points to 60¼, while a separate market source had the same notes up 1 point to 59.

A trader said the notes traded as high as 60.

Peabody’s 10% notes due 2022 jumped up 3 points to 84 from its last trading levels last Wednesday, a market source said. A trader said they went out at 84½.

Avaya’s upside

Before heading into the Thanksgiving holiday, The Wall Street Journal reported last Wednesday that the telecommunications company is weighing the option of filing for Chapter 11 amid discussion of a potential asset sale of its call-center software business for $4 billion.

Clayton Dubilier & Rice LLC is the leading buyer in the most-recent round of bidding, according to multiple news outlets.

A trader said Avaya’s 7% notes due 2018 were up 3/8 point to 85 7/8. Another trader said they were “around 86” at market’s close.

The 10½% notes due 2021 were up 4 1/8 points to 44 1/8, a trader said.

“Those continue to move up,” another trader said, referring to the 10% notes.

In oil and related

The fluctuation in oil prices has rested on the daily speculation of OPEC’s decision to curb output, and. with signs pointing to a potential accord that could be reached when countries meet on Wednesday, oil futures rose several points, inching closer to a $50-per-barrel level.

Stone Energy’s 7½% notes due 2022 jumped 2 points to 57, a market source said. The notes last traded Nov. 23.

EP Energy’s 7¾% notes due 2022 were up ¼ point to 79¾, a trader said.

Rounding out the big risers of the day were Weatherford International’s 6½% notes due 2036 – up 3 points to 76 – and its 7% notes due 2038, which were up almost 2 points to 79, a market source said.

MEG Energy Corp.’s 6½% notes due 2021 were up a ½ point to 88½, a trader said.

GenOn Energy, which has been scrutinized by its affiliate NRG Energy Inc. for not having enough liquidity to repay senior notes due 2017, were down 1¼ points in its 7 7/8% notes due 2017, a trader said.

Geophysical service company CGG SA, which deals mainly in the oil and gas industry, was down 1½ points to 42½ in its 6½% notes due 2021, a market source said.

Upbeat iHeart

Several of iHeartCommunications’ distressed notes traded up on news that the company is seeking to amend the indentures of six series of its notes in order to exclude holders who are neither institutional accredited investors nor non-U.S. persons from any offer to consent, waive or amend the terms of the notes as part of an exchange offer.

iHeartCommunications is offering a fee of a specified dollar amount for each series of notes covered by the solicitation. The fee will be divided among all holders who deliver consents.

On Monday, the 10% notes due 2018 traded “the most of anything” in the company’s distressed notes, a trader said, and were up “3-4” points to 75½.

The 14% notes due 2042 were up 1½ points to 42½, several traders said, and the 10 5/8% notes due 2023 were up 1½ points to 75½.

There is a $950,000 fixed fee and $1,425,000 contingent fee for the 10 5/8% priority guarantee notes due 2023.

The fee has two parts, a fixed consideration which will be paid if the solicitation is successful and a contingent consideration which will be paid on the effectiveness of a subsequent amendment to the note indenture where the consideration for the amendment includes debt or equity securities issued on an unregistered basis in an exchange offer transaction. The contingent fee, if paid, will only be paid once.

Round up

In health care and pharmaceuticals, Community Health Systems Inc.’s 6 7/8% notes due 2022 were down ¾ point to 70, a trader said, and its 8% notes due 2019 were down ¼ point to 82½.

Valeant Pharmaceuticals International Inc.’s 7½% notes due 2021 stayed at an 87 5/8 handle.

A market source said Valeant’s 5 5/8% notes due 2021 were up 3 points on a single trade to an 83 handle.

Communication provider Windstream Corp.’s 6 3/8% notes due 2023 were unchanged at 86¾, a trader said. A market source said the same notes were up a ¼ point to 87¾.

Peter Heap contributed to this review

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