Bombardier bonds fly higher on investment chatter; Magnum Hunter debt declines, equity up

By Stephanie N. Rotondo

Phoenix, Oct. 5 – The distressed debt market was on the rise Monday amid a rally in the broader markets.

“Everything is up today,” a trader said. “Up, up, up.”

Still, most of the day’s activity was centered on higher-quality issues within the high-yield space, such as a new deal from Cablevision Systems Corp./Altice SA.

As for more distressed names, Bombardier Inc. was looking to climb higher during the session. Over the weekend, it was reported that the aircraft manufacturer was looking to Quebec’s public pension managers for a potential investment. Early Monday, ScotiaBank put out a report that claimed the company could run out of cash by mid-2016.

But even as most of the market ended with a firmer tone, some issues continued to feel the pressure.

U.S. Steel Corp.’s 7 3/8% notes due 2020, for instance, declined a touch to 78 3/8. Steelmakers have been struggling of late as cheaper imports have been dumped on the market and commodity prices have dwindled.

Meanwhile, Tronox Ltd.’s 6 3/8% notes due 2020 were deemed “off another 3 [points]” at 59¾.

“These have been really getting beat up,” a trader said.

Bombardier flies higher

Bombardier is reportedly looking at ways it can tap the market for cash – which could be a good thing, as ScotiaBank, for one, believes cash is running out.

A trader said the 7½% notes due 2023 popped 2½ points, ending at 77¼.

A second market source placed the 7¾% notes due 2020 at 88¼ bid, up 2¾ points.

Reuters recently reported that Montreal-based Bombardier was in talks with Caisse de depot et placement du Quebec, the manager of the province’s public pension plans, on a potential new investment.

The firm is already one of the company’s largest stakeholders. However, such an investment could prove quicker and easier than selling off assets.

Bombardier has struggled to get its new CSeries jets up and ready for sale, and while the smaller version is nearly there, more time is needed on the larger version. According to ScotiaBank analyst Turan Quettawala. That could mean the company will burn through its available cash by mid-2016.

In a note to clients, Quettawala also noted that one purported sale of a minority stake in the company’s train manufacturing unit would most likely be immaterial.

“As such, we don’t see this as the right course of action,” Quettawala wrote in the note.

Magnum Hunter retreats

Magnum Hunter Resources Corp.’s debt structure continued to be weak on Monday, despite a gain in oil as well as a boost in the company’s common stock.

One distressed bond trader noted that the 9¾% notes due 2020 fell a quarter-point to 43¾.

The 8% series D cumulative preferreds (NYSE: MHRPD) were also weaker, finishing at $7.66, down 32 cents, or 4.01%.

However, the equity (NYSE: MHR) improved by 4.5 cents, or 9.14%, to close at 53.95 cents.

The Irving, Texas-based oil and gas company’s preferreds – as well as its bonds – failed to improve even as domestic crude prices gained 1.67% on the day. The price gain was attributed in part to a gain in gasoline prices, as well as a new willingness on Russia’s part to engage with OPEC and non-OPEC producers to deal with the current volatility in the oil markets.

But as for Magnum Hunter itself, it could be facing a takeover attempt.

Last week, it was reported that Atlas Consulting, an Austin-based energy consulting company, has lined up enough shareholder support to attempt a takeover. Dallas Salazar, CEO of the firm, said there is one creditor who is willing to purchase a large portion of the company.

Salazar also remarked that he thought the company had attractive assets but was dealing with an over-leveraged balance sheet.

© 2015 Prospect News.
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