Distressed oil bonds gain; Washington Prime, Diamond Sports fall; Hertz notes better

By Cristal Cody

Tupelo, Miss., March 5 – Oil prices soared more than $2 a barrel on Friday on extended production cuts after adding over $3 a barrel in the prior two sessions, sending distressed oil bonds mostly higher on the day.

North Sea Brent crude oil futures for May deliveries rose $2.62 to settle at $69.36 a barrel after settling up $2.67 the prior day.

West Texas intermediate crude oil for May deliveries settled $2.26 higher at $66.15 a barrel following a $2.55 bump on Thursday.

The Organization of the Petroleum Exporting Countries announced on Thursday that production cuts would be extended for most countries through April.

In the secondary market, Callon Petroleum Co.’s 6 3/8% senior notes due 2026 (Caa2/D) gained another 3¼ points after improving 6 points over the prior two sessions, according to a market source.

The notes were quoted at 85¼ bid after the session ended.

Offshore driller Transocean Inc.’s 11½% senior notes due 2027 (Caa3) saw heavy trading at 85¾ bid going out, up ¾ point from Thursday, according to a market source.

Canadian energy company Athabasca Oil Corp.’s 9 7/8% notes due 2022 (/B-/d) also ticked up 4¾ points during the session to 74¼ bid, a source said.

Meanwhile, oil and gas drilling contractor Nabors Industries Inc.’s 5¾% senior notes due 2025 (Caa2/CCC-) were quoted softer at 80¾ bid, down from 82½ bid on Thursday, a source said.

Market tone was mostly stronger Friday with major stock indices closing up more than 1½% after the February U.S. jobs report came in better than expected.

Total nonfarm payroll employment rose by 379,000 in February, while the unemployment rate was mostly unchanged at 6.2%, the Labor Department said.

Employment totals came in stronger than the 200,000 increase forecasted and better than the 6.3% jobless rate expected, a source said.

The iShares iBoxx High Yield Corporate Bond ETF turned positive and closed up 26 cents, or 0.30%, to $86.62.

The S&P U.S. High Yield Corporate Distressed Bond index has a 0.95% month-to-date total return and a year-to-date total return of 15.11% as of Thursday.

Washington Prime sinks

In other distressed secondary trading, Washington Prime Group, LP’s 6.45% notes due 2024 (C/C/C) dropped 9½ points on Friday to head out at 54 bid, sources said.

The notes have softened nearly 20 points since it was disclosed on Feb. 16 that the company missed a $23.2 million interest payment on the notes.

Washington Prime Group, Inc. reported in an 8-K filing with the Securities and Exchange Commission in February that the operating partnership elected to withhold the interest payment that was due Feb. 15.

The company said if the payment issue is not resolved within 30 days of that date, the missed payment will constitute a default.

The Columbus, Ohio-based shopping center real estate investment trust said in the filing that it has hired legal counsel and an investment banker to help in discussions with lenders.

Hertz rebounds

Hertz Corp.’s bonds climbed in trading ahead of the weekend after softening Thursday as the company prepares to exit bankruptcy, a source said.

The car rental operator’s 5½% notes due 2024 improved to 80 bid by late in the day after declining 2½ points to 78¾ bid in the previous session.

The notes are down 4 points from Monday.

On Tuesday, Hertz filed a joint Chapter 11 bankruptcy plan of reorganization and reported it received a $4.2 billion buyout offer from Knighthead Capital Management, LLC and Certares Opportunities LLC to purchase a majority and up to all of the company’s common stock after it exits bankruptcy.

A hearing on the offer is scheduled for April 16 in the U.S. Bankruptcy Court for the District of Delaware.

Hertz, which filed for Chapter 11 in May, expects to exit bankruptcy this summer.

AMC bonds gain

Distressed movie theater owner AMC Entertainment Holdings, Inc.’s 12% second-lien senior secured notes due 2026 (Ca/C) rose ¼ point to 77¾ bid late Friday as New York City reopened theaters at 25% capacity, a market source said.

The notes are ¼ point higher from where the issue traded in the same session a week ago and remain stronger than where the bonds were quoted at the start of the year at 27 bid.

AMC plans to release fourth-quarter and year-end earnings results on March 10.

Diamond Sports softens

Elsewhere in the distressed secondary market, Diamond Sports Group LLC’s 5 3/8% senior secured notes due 2026 (Ba3/CCC+) softened 1 point on Friday to 68 bid after falling 1 point in the prior session, a market source said.

The notes are down 3 points week to date and declined 7 points in the prior week after parent company Sinclair Broadcast Group, Inc. reported weak guidance for the sports segment group.

Sinclair also announced that it remains interested in liability management initiatives that could include a debt exchange or redemption.

Mallinckrodt higher

Meanwhile, bankrupt pharmaceuticals maker Mallinckrodt plc’s 5 5/8% senior notes due 2023 added 2 points to trade Friday at 54¼ bid, a source said.

The company (/D/) filed for Chapter 11 bankruptcy in October.

In a motion filed in February with the U.S. Bankruptcy Court for the District of Delaware, Mallinckrodt said it has reached an agreement with restructuring support agreement parties to pursue a plan of reorganization.

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

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