Intelsat, Community Health notes fall after third-quarter earnings releases; Denbury continues drop

By James McCandless

San Antonio, Oct. 30 – The distressed debt market trended negatively across the board on the back of a few anticipated third-quarter earnings releases.

Intelsat SA’s notes fell after the company reported a wider than expected loss in its third-quarter earnings report.

The weakness spread to domestic telecom Frontier Communications Corp.’s issues.

In the healthcare space, Community Health Systems, Inc.’s paper dropped after the company announced a loss in its third-quarter report and pointed to further hospital sales.

Meanwhile, in the energy sector, Weatherford International plc’s notes continued to spiral downward as the market continues to chip away at the company after the Monday release of its third-quarter results.

Denbury Resources Inc.’s issues lost a second day as the market casts doubt on a proposed $1.7 billion acquisition of Penn Virginia.

Elsewhere, Sanchez Energy Corp.’s paper crashed in reaction to the company appointing a restructuring expert to its board. The notes of sector peers EP Energy Corp. and California Resources Corp. also trended negative.

Hexion Inc.’s notes continued to struggle.

Intelsat lower

Intelsat’s notes moved lower on Tuesday, traders said.

The Intelsat Jackson SA 5½% notes due 2023 lost about 1 point to close at around 89 bid. The Intelsat (Luxembourg) SA 8 1/8% notes due 2023 dropped about 2¼ points to close at around 8 ½ bid.

On Tuesday morning, the Luxembourg-based satellite company posted a 46 cents per share loss in its third-quarter earnings report, wider than the expected 34 cents per share loss. The company also posted $536.92 in revenues for the quarter, lower than the $539 million estimates.

“There’s been this euphoria over C-band and its operators that have been driving a rise in Intelsat over the last year,” a trader said. “I think hedge funds are primed to cash in now.”

Notes improved in the name during the summer as the Federal Communications Commission announced that it was considering expanding access to the C-band spectrum to mobile providers, potentially expanding revenue streams for Intelsat and other companies that manage access to the spectrum.

“I think they could’ve had a worse day,” another trader said. “But their guidance statements are pointing to more positive results in the near future as they cut spending.”

On the domestic side, Frontier’s issues were also weaker.

The 7 5/8% notes due 2024 lost about ¼ point to close at around 59¾ bid. The 10½% notes due 2022 shaved off about 1½ points to close at around 82¾ bid. The 11% notes due 2025 fell about 1¼ points to close at 73 bid.

Community Health down

Community Health’s paper also dipped, market sources said.

The 6¼% paper due 2023 shed ½ point to close at 91½ bid. The 6 7/8% paper due 2022 also lost ½ point to close at 50½ bid.

Notes started moving lower Tuesday after the Franklin, Tenn.-based hospital operator posted a third-quarter earnings loss of $1.64 per share against estimates of a $1 loss per share.

In a conference call, company executives outlined their intention to continue with the company’s hospital divestiture plan, with seven more hospitals expected to be off the books by the end of the year.

“Past the surface, the numbers were OK,” a trader said. “They seem to be disciplined in their divestiture plan so that shouldn’t spook too many people.”

Weatherford continues drop

In the energy space, Weatherford’s notes continued to move lower, traders said.

The 9 7/8% notes due 2025 plummeted about 10¼ points to close at around 75½ bid. The 7¾% notes due 2021 tumbled 9½ points to close at 82 bid.

The market is continuing to react to the Baar, Switzerland-based oilfield services company’s poor earnings report released Monday, showing a 10 cents per share loss and $1.44 billion in revenues.

“It’s just getting killed,” a trader said. “It’s become this season’s punching bag. The equity’s lost half its value. They’ve been showing weakness for years and this could be the tipping point.”

Denbury off

Meanwhile, Denbury’s issues were also negative, market sources said.

The 5½% notes due 2022 fell about 2 points to close at around 86½ bid. The 6 3/8% notes due 2021 lost 2¼ points to close at 94¼ bid.

On Monday, the 5½% notes shaved off about 2 points and the 6 3/8% notes dropped about 1 point.

The Plano, Texas-based independent oil and gas producer triggered declines after announcing the $1.7 billion acquisition of Houston-based competitor Penn Virginia in a cash and common stock deal. The company would also assume Penn Virginia’s debt.

“The chatter around this is that a lot of holders don’t think the deal will go through,” a trader said. “And if it does, they’re worried about a weaker structure.”

To complete the deal, Denbury would issue 191.6 million new shares and pay $400 million in cash.

Elsewhere in the sector, Houston-based peer Sanchez Energy notes crashed.

The 6 1/8% notes due 2023 lost 7½ points to close at 39½ bid.

After the close Monday, the company announced management changes, replacing its chief financial officer, granting its chief executive officer the title of president and naming two new independent members to its board.

“One of them is a restructuring and turnaround expert, and that’s what the focus was on today,” a trader said. “They’re putting the pieces in place for a possible restructure.”

Other benchmark oil names fell with crude oil futures.

Houston-based peer EP Energy’s 7¾% paper due 2022 lost 1 point to close at 74¼ bid.

Los Angeles-based producer California Resources’ 8% notes due 2022 fell about 2¼ points to close at around 90 bid.

West Texas Intermediate crude futures fell again, this time by 95 cents to close the session at 66.09 per barrel. North Sea Brent futures lost $1.65, ending the day at $75.69 per barrel.

Hexion slips

In the chemicals sector, Hexion’s issues were also caught up in Tuesday’s negativity, traders said.

The 9% notes due 2020 lost 1 point to close at 58½ bid. The 13¾% notes due 2022 declined 2¾ points to close at 63½ bid.

“That got caught up in the weakness,” a trader said. “But it’s been hit hard for a while.”

The Columbus, Ohio-based producer’s structure has been trending downward throughout October as the company’s holders prepare for negotiations about the company’s $2.4 billion in debt coming due in 2020.

The 9% notes started Oct. at around 84 bid, trending negative since, according to Trace data.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.