Sanchez Energy notes fall on ratings downgrade; Hexion issues continue tumble over debt

By James McCandless

San Antonio, Nov. 5 – A new week in distressed debt trading saw focus remain on high-profile names.

Sanchez Energy Corp.’s notes fell after the company received a ratings downgrade in the wake of its third-quarter earnings release.

Elsewhere in energy, California Resources Corp. and Hi-Crush Partners LP’s issues saw negative pressure.

Weatherford International plc’s paper was also trending lower.

Meanwhile, Hexion Inc.’s paper continued to tumble amid growing concerns that second-lien holders will not benefit from future debt talks.

In retail, Rite Aid Corp.’s notes saw a boost. Sector peer Neiman Marcus Group, Inc.’s issues saw similar improvement.

Telecom name Intelsat SA’s notes were mixed in high activity.

Community Choice Financial Inc.’s notes were trading significantly lower from last week’s levels.

Sanchez down

Sanchez’s notes declined at the start of the week, traders said.

The 6 1/8% notes due 2023 lost about 1 point to close at 38½ bid.

On Monday, Moody’s Investors Service downgraded the Houston-based independent oil and gas producer’s corporate family rating, probability of default rating, senior unsecured note rating and its speculative grade liquidity rating.

The agency also affirmed a negative outlook.

The ratings change comes on the heels of last week’s third quarter earnings report, in which the company showed a loss of 15 cents per share for the third quarter after analysts expected a 12 cents per share loss.

Elsewhere in the energy space, Los Angeles-based peer California Resources’ issues were also negative.

The 6% notes due 2024 fell 1¼ point to close at 81 bid. The 8% notes due 2022, while moving as low as 90 in intraday trading, ended level at 90½ bid, according to Trace data.

On Friday, the company released its third-quarter earnings results, reporting 81 cents per share profit against expectations of an 8 cent loss per share.

The company also reported $828 million in revenue.

Houston-based petroleum logistics name Hi-Crush’s paper continued to fall.

The 9½% paper due 2026 shed 2¼ points to close at 76½ bid.

“Those are getting destroyed every single day,” a trader said.

Baar, Switzerland-based oilfield services name Weatherford’s notes joined the negative trend.

The 7¾% notes due 2021 lost 1¼ point to close at 80½ bid. The 8¼% notes due 2023 shaved off ¼ point to close at 73 bid.

“It looks like the name of the game this week is going to be to continue kicking all the names that got beat up last week,” a trader said.

Hexion falls

Meanwhile, Hexion’s issues continue to see losses, market sources said.

The 9% notes due 2020 dropped 4 points to close at 53½ bid. The 6 5/8% notes due 2020 lost 1 point to close at 85½ bid.

The Columbus, Ohio-based chemical producer’s issues have been under pressure in a month-long saga over second-lien holders’ concerns over what value they will be left with in upcoming debt talks.

The company has $2.4 billion in debt maturing in 2020.

“The second-liens are trading so poorly that they might not get anything,” a trader said. “The thought is that the collateral package for the first-liens are questionable at best, so that leaves the second liens in an even worse position.”

Rite Aid bounces

In retail, Rite Aid’s paper jumped up, traders said.

The 7.7% paper due 2027 picked up 4½ points to close at 74½ bid. The 6 1/8% paper due 2023 added 1½ point to close at 87 bid.

The Camp Hill, Pa.-based drugstore retail chain has recently been caught up in the weakness felt throughout the sector.

“Everything in retail’s been getting killed so it’s a little surprising to see this,” a trader said. “We’re not sure if there’s anything behind it.”

Dallas-based sector peer Neiman Marcus’ 8% notes due 2021 rose ¾ point to close at 60½ bid.

Intelsat mixed

Intelsat’s issues were mixed, market sources said.

The Intelsat Jackson SA 5½% notes due 2023 edged up ¼ point to close at 90 bid. The Intelsat (Luxembourg) SA 8 1/8% notes due 2023 lost ½ point to close at 84¾ bid.

The Luxembourg-based satellite telecom name’s issues have trended negative since the company reported a 46 cents loss per share for the third quarter, missing expectations of a 34 cents per share loss.

The company also showed revenues of $536.92 million.

Community Choice tanks

Community Choice’s paper was declined, traders said.

The 10¾% paper due 2019 fell 1 point to close at 59 bid.

On Friday, the 10¾% paper cratered 12¾ points.

The Dublin, Ohio-based alternative financial services company’s paper hit a year-low, according to Trace data.

“We’re not sure exactly what’s going on,” a trader said. “One thing it could be tied to is an interest payment that they had to make last week on the notes.”

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