Nine Energy soft; Talen dips; Callon stronger; Mallinckrodt active; Diamond Sports down

By Cristal Cody

Tupelo, Miss., March 31 – Houston-based oilfield services company Nine Energy Service, Inc.’s bonds were not active in secondary trading on Wednesday following the company’s downgrade by Moody’s Investors Service.

Nine Energy’s 8¾% notes due 2023 (Caa3/D) were last seen trading on March 24 at 30 bid, a source reported.

“Everybody’s already positioned themselves, and the downgrade may be confirmation they’re going to restructure,” one source said.

The issue has declined from trading at the start of March at 50½ bid. The issue started the year in the 45¼ bid range.

Nine Energy announced on March 8 that it expects to generate a net loss and negative adjusted EBITDA for the first quarter following major shutdowns within all its Texas service lines due to the February Texas winter storm.

Moody’s downgraded the company to Caa3 from Caa1 and its senior notes rating to Caa3 from Caa2 on Wednesday, citing higher debt refinancing and restructuring risks as debt maturities approach amid a challenging operating environment.

Talen Energy Supply LLC’s 6½% senior notes due 2025 (B3/CCC+/B) softened to 80½ bid from 80 7/8 bid on Tuesday in light trading during the session, a source said.

The notes are trading modestly softer from the 81¾ bid range at the start of February.

The Woodlands, Tex., and Allentown, Pa.-based power company reported it is among energy companies impacted by the February winter storm.

Houston- and Princeton, N.J.-based NRG Energy Inc. announced earlier in March that it expects an estimated $750 million loss due to the winter storm and withdrew its 2021 guidance due to new resettlement data from the Electric Reliability Council of Texas.

Several energy companies have filed for bankruptcy following exorbitant costs levied during the February Texas winter storm, including Entrust Energy, Inc., Griddy Energy LLC and Brazos Electric Power Cooperative Inc.

Newark, N.J.-based energy supplier Genie Energy Ltd. reported spot energy prices soared from a usual $50 per megawatt hour to $9,000 per megawatt hour over the period.

San Antonio electric utility CPS Energy has filed lawsuits against Ercot and CPS’ natural gas suppliers for charging excessive prices during the storm.

Oil volatile

Elsewhere in the oil and gas space, bonds followed oil prices over the day, a source said.

“Oil was very volatile,” the source noted.

West Texas intermediate crude oil futures for May deliveries declined $1.39 to settle the day at $59.16 a barrel.

North Sea Brent crude oil futures for May deliveries settled unchanged at $64.14 a barrel.

Houston-based oil and gas company Callon Petroleum Co.’s 6¼% senior notes due 2023 (Caa2/CCC+) gained 1 point to 89½ bid on more than $10 million of bonds traded, a source said.

Transocean Inc.’s bonds were modestly softer to about ½ point better over the day, according to a market source.

Overall market tone improved over the session.

The iShares iBoxx High Yield Corporate Bond ETF rose 42 cents, or 0.48%, to close at $87.18.

Mallinckrodt active

In other distressed secondary trading on Wednesday, bankrupt pharmaceuticals maker Mallinckrodt plc’s bonds were mixed but remain stronger than at the start of the year, a source said.

The company’s 5 5/8% notes due 2023 climbed 2 5/8 points to 70¾ bid on $5 million of secondary volume.

The notes traded in the same session a week ago at 64 bid and at the start of the year at 37 bid.

Mallinckrodt’s 5¾% notes due 2022 fell ¾ point to 68 bid on more than $7 million of secondary supply during the session.

“A month ago, it was 52¾,” the source said. “At the beginning of the year, it was 36¼, so they’ve almost doubled.”

Mallinckrodt (/D/) filed for Chapter 11 bankruptcy in October in the U.S. Bankruptcy Court for the District of Delaware.

The company announced earlier in March that it reached an agreement with a group of first-lien term lenders holding about $1.3 billion of its outstanding first-lien term loans to support its restructuring support agreement.

Mallinckrodt received approval on Feb. 25 to extend filing a bankruptcy restructuring plan until Aug. 9.

Diamond Sports declines

Elsewhere, Diamond Sports Group LLC’s bonds fell more than 1 point in active secondary trading on Wednesday, a source said.

The company’s 6 5/8% senior notes due 2027 (B3/CCC-) traded down more than 1½ points to just under 52¾ bid on more than $6.8 million of secondary volume.

Parent company Sinclair Broadcast Group, Inc. reported in February soft guidance for the sports broadcast group and an interest in liability management initiatives that could include a debt exchange or redemption.

Moody’s downgraded the company’s notes earlier in March.

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