PBF flat; Transocean up; Talen holds gains; Diamond Sports higher; China Evergrande soft

By Cristal Cody

Tupelo, Miss., Sept. 28 – Energy bonds mostly held onto gains in the distressed space on Tuesday as oil prices fell and market tone weakened.

Petroleum refiner PBF Holding Co. LLC’s notes were steady in strong trading.

The Parsippany, N.J.-based issuer’s 6% senior notes due 2028 (Caa1/B/B+) traded flat by the close at 65¼ bid after picking up nearly 2 points on Monday, a source said.

Vernier, Switzerland-based offshore driller Transocean Inc.’s paper remained stronger over the day. The company’s 7½% senior notes due 2026 (Ca/CCC+) climbed 1 point to 80½ bid after adding about 2½ points in the prior session.

Oil prices declined after starting the week more than $1 higher.

Brent crude futures for November deliveries settled Tuesday down 44 cents at $79.09 a barrel.

Market tone was weak at the open and stayed soft over the session with the Nasdaq heading out down 2.83%.

The iShares iBoxx High Yield Corporate Bond ETF fell 40 cents to $87.43.

Measured market volatility was high.

The Chicago Board Options Exchange’s CBOE Volatility index soared nearly 24% by the close to 23.25.

In other energy issues, Talen Energy Supply LLC’s bonds were mostly unchanged after seeing gains in the prior week.

Elsewhere, Diamond Sports Group LLC’s bonds have climbed higher in back-to-back sessions with the notes trading about 1½ points better week to date.

China Evergrande Group’s bonds remained soft on Tuesday.

The “heavily indebted real estate developer” is in limbo for the next few weeks during the grace period after its missed international interest payment last week, according to a Confluence Investment Management note on Tuesday.

“The sector as a whole, however, got a boost today when the People’s Bank of China said it would support liquidity in the sector,” Confluence strategists said.

Sunac China Holdings Ltd.’s paper continued to decline on Tuesday but pulled back on heavier losses seen on Friday and Monday.

The Evergrande rival, “which had been under heavy selling pressure recently as investors feared it could be the next to default, is rebounding particularly strongly today,” according to the Confluence note. “Despite the central bank action today, Chinese debt risks remain high.”

Talen unchanged

Talen’s 10½% senior notes due 2026 (B3/CCC/B-) headed out flat at 56¼ bid, a source said.

The issue was unchanged from levels seen on Friday and Monday after ending the prior week 5¾ points better.

Talen announced last week that a subsidiary secured up to a $175 million strategic capital partnership with Orion Energy Partners.

The Woodlands, Tex., and Allentown, Pa.-based power company plans to use the investment to fund its clean energy efforts and a bitcoin mining joint venture.

Diamond Sports up

Diamond Sports’ 6 5/8% senior notes due 2027 (Caa2/CC) rose about ½ point to 44½ bid on Tuesday following a 1-point bump on Monday, a source said.

The company’s 5 3/8% senior secured notes due 2026 (B2/CCC) improved about ¼ point to trade at 66¼ bid. The secureds traded Monday 1 point higher from the prior week.

S&P Global Ratings downgraded Diamond Sports and parent Sinclair Broadcast Group Inc. in August.

Sinclair announced last month that DISH Network Corp. dropped its broadcast and tennis TV stations.

In June, Sinclair reported unsuccessful attempts to secure new funding for Diamond Sports, a Chesapeake, Va.-based sports broadcast group.

Sinclair will report third-quarter earnings results on Nov. 3.

Evergrande lower

China Evergrande’s bonds remained soft on Tuesday with other bonds in the property developer space also weak, sources said.

The Shenzhen, China-based real estate developer has entered into a 30-day grace period following missed debt payments due last week.

Evergrande’s 8¾% senior notes due 2025 (C/C/C) dipped 5/8 point to 24½ bid over the day.

The notes dropped 1 5/8 points on Monday but are still off the low of 23¾ bid seen in the prior week’s market-wide sell-off.

Tianjin, China-based property developer Sunac China Holdings’ dollar bonds eased further on Tuesday in light trading.

Sunac’s 7% senior secured notes due 2025 (B1/BB-) were down about 1¾ points at the 79½ bid area.

The secured notes dropped about 6 points on Monday after trading over 4 points weaker on Friday.

Distressed returns strong

Distressed index returns opened the last week of September stronger.

The S&P U.S. High Yield Corporate Distressed Bond index total return was 0.72% on Monday, up from 0.23% on Friday and minus 1% in the same session a week ago.

Month-to-date total returns climbed to 2.4% on Monday versus 1.66% ahead of the weekend and 0.16% in the same session last week.

Year-to-date total returns rose to 29.72% as the week kicked off, compared to 28.79% on Friday and 26.89% in the week-ago session.

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