Transocean softens; CineMedia paper sinks; Bausch improves; Country Garden notes quiet

By Cristal Cody

Tupelo, Miss., Sept. 19 – Transocean Inc.’s 7¼% senior notes due 2025 (Ca/CCC) fell more than ¾ point with more than $10 million of paper traded on Monday.

The offshore driller’s paper went into the weekend softer after parent company Transocean Ltd. was downgraded on Friday.

Oil futures improved slightly over the day.

West Texas Intermediate crude oil benchmark futures for October deliveries settled up 62 cents at $85.73 a barrel.

Stocks also improved on Monday after shaking off FedEx Corp.’s surprise preliminary weak first-quarter announcement that helped send indices down on Friday.

The iShares iBoxx High Yield Corporate Bond ETF gained 28 cents, or 0.38%, to $74.48 by Monday’s close.

Measured volatility was lower with the CBOE Volatility index down 2.05% at 25.76.

Meanwhile, National CineMedia, LLC’s 5¾% senior notes due 2026 (Caa3/CCC-) sank 7½ points to a handle in the low 20s on Monday.

Bausch Health Cos. Inc.’s notes perked up in mostly light trading over the day.

Bausch’s 4 7/8% secured notes due 2028 (B3/B/BB-) rallied 3¼ points on $1.34 million of volume.

In distressed emerging markets issues, Country Garden Holdings Co. Ltd.’s dollar notes stayed quiet in the secondary market on Monday with activity last seen ahead of the weekend and the downgrade from S&P Global Ratings.

Numerous issuers in the space including China Evergrande Group, Kaisa Group Holdings Ltd. and Fantasia Holdings Group Co. Ltd. have defaulted in the past year.

August defaults high

S&P said in a report on Monday that U.S. defaults in August alone account for 25% of the regional year-to-date total.

The global corporate default tally rose to 53 as of Aug. 31 following 10 defaults during the month.

One-third of the defaults were from the U.S. health care sector, S&P said.

Fitch Ratings said in a September report that it anticipates benign high-yield energy default rates through 2023, with 0.5% projections for both 2022 and 2023, on elevated oil prices.

In a note released on Monday, Fitch reported the high-yield market is shrinking with light issuance so far in 2022 and several major rising stars, including Kraft Heinz Foods Co. and T-Mobile USA Inc., leaving the junk space for investment grade.

Less than $10 billion of bonds have been brought to the primary market in the past five months, Fitch said.

Following record junk issuance in 2020 and 2021, the debt maturity wall was pushed out to 2024 with $103 billion coming due by that year’s end and only $16 billion of that debt rated at CCC or lower, Fitch noted.

Transocean softens

Transocean’s 7¼% senior notes due 2025 (Ca/CCC) fell more than ¾ point to the 83 bid range on Monday in active trading totaling more than $10 million, a source said.

S&P said Friday it lowered Transocean Ltd. to CC from CCC- based on what it considers a distressed exchange equivalent to default.

The Steinhausen, Switzerland-based offshore driller announced earlier in the week that it executed a privately negotiated bond exchange and purchase agreements that provide it with $175 million of liquidity in transactions expected to close Sept. 30.

National CineMedia drops

National CineMedia’s 5¾% senior notes due 2026 (Caa3/CCC-) dropped 7½ points to head out Monday at 24½ bid, a market source said.

Trading was active with $5.8 million of the Centennial, Colo.-based cinema advertising company’s paper changing hands.

Bausch trades higher

Bausch’s 4 7/8% secured notes due 2028 (B3/B/BB-) rallied 3¼ points to 65¾ bid by the close, a source said.

Activity was light on $1.34 million of volume.

Bausch’s 8½% notes due 2027 (Caa3/CC/C) also improved ¾ point to 42¼ bid in thin trading.

In the previous week, Bausch announced the early results of its offer to exchange existing senior notes for up to $4 billion of new secured notes with approximately $5.58 billion of notes validly tendered.

Bausch launched the debt restructuring on Aug. 30.

The Laval, Quebec-based pharmaceutical company plans to spin off unit Bausch + Lomb.

“The early tender results indicate that Bausch will delever its balance sheet by up to $2.45 billion as this majority participation looks to have achieved the leverage and coverage ratio thresholds required for the spinoff of its eye health business,” according to a Fitch note released on Monday.

Country Garden quiet

Country Garden’s 8% notes due 2024 were last seen trading on Friday more than 1 point better in the 59¾ bid area in light supply, a market source said.

S&P on Monday dropped the issuer’s rating to BB from BB+ on softening sales and growing construction costs.

Moody’s dropped the Foshan, China-based property developer to junk in June.

Country Garden announced in August that it expected lower profits for the first half of the six-month period ended June 30 due primarily to the Covid-19 business environment and lower property sales.

Distressed index

The S&P U.S. High Yield Corporate Distressed Bond index remained soft on Friday.

On Thursday, the index had a level of 198.76, down from 198.97 on Wednesday, 199.34 on Tuesday and 201.85 on Monday.

One-day returns ended the week lower at minus 0.9%, compared to minus 0.11% on Thursday.

Month-to-date total returns dropped to minus 2.06% from minus 1.17% on Thursday.

Year-to-date total returns also softened to minus 22.72% by the end of the week versus minus 22.02% on Thursday.

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