Ultra Petroleum gets huge gain after plan support agreement; Peabody rallies on commodities; oil mixed

By Colin Hanner

Chicago, Nov. 22 – Movement in some oil and metals contributed to the movement of some bonds in distressed debt-land on Tuesday, with one of those sector-related names coming out of the woodwork to post sizable gains.

Ultra Petroleum Corp. notes were up more than 10 points in one of its notes, coming off a plan support agreement with its shareholders and senior noteholders on Monday.

“Ultra [Petroleum] was trading heavily today,” a trader said. “Otherwise, volumes were falling greatly [in the distressed arena].”

Peabody Energy Corp. rebounded off a string of point-shedding days due to coal concerns. One trader said that Peabody’s sudden rise was due to the momentum generated by the overall rise in commodities on Tuesday, as well as comments made by president-elect Donald Trump in a video released on Monday.

Oil fluctuated on Tuesday, rising in the morning based on confidence in the Organization of Petroleum Exporting Countries’ ability to reach a consensus supply cut deal, then slipping on fears that Iran and Iraq would not participate in production cuts.

Yet, distressed oil-related notes tended to rise, as oil futures were overall flat on the day.

Denbury Resources Corp. continued to climb, along with MEG Energy Corp. and California Resources Corp., whereas GenOn Energy, Inc. slipped.

Modest gains in healthcare notes – Community Health Services Inc. and Quorum Health Corp. – continued, and pharmaceutical companies, like Valeant Pharmaceuticals International Inc. and Concordia International Corp., had similar upward movement.

Traders also pointed to the continued movement coming out of Avaya Inc., which also saw a steep rise in its bonds on Tuesday.

Ultra’s ultra move

On Monday, Ultra Petroleum entered into a plan support agreement and backstop commitment agreement with holders of a substantial majority of the principal amount of its outstanding 5¾% senior notes due 2018 and 6 1/8% senior notes due 2024 and shareholders who own at least a majority of the company’s common stock or economic interests, according to a news release.

A trader said that these agreements were the driving force behind the 9½-point increase in its 5¾% notes due 2018, which ended the day at a 93 handle.

The 6 1/8% notes due 2024 were up 13 points to 96 from 83, its last trading level from almost a month ago.

The agreement sets the terms of a joint plan of reorganization with a total plan value of $6.25 billion, $6 billion or $5.5 billion, depending on commodity prices, for the Ultra entities.

The total enterprise value of the Ultra entities will be $6 billion, provided that if the average closing price of the 12-month forward Henry Hub natural gas strip price during the seven trading days preceding the launch of a rights offering solicitation is greater than $3.65/MMBtu, the plan value will be $6.25 billion. If that price is less than $3.25/MMBtu, the plan value will be $5.5 billion.

Under the backstop agreement, the commitment parties will fund a $580 million offering of rights to purchase shares of common stock in the reorganized company. The company said $580 million in cash will be raised at an implied 20% discount.

Peabody (and coal) get back

The St. Louis-based coal company was in the gainer column in the distressed arena after spending several days trekking downward amid coal concerns and traders speculating that it may have been overbought.

A market source said the 6½% notes due 2020 were up 3¼ points to 57¾, and a trader said they had traded as high as 4 points higher on the day before moving down at close.

The 7 7/8% notes due 2026 were up nearly 3 points to 55½, a market source said, and the 10% notes due 2022 were up 3 points to 81½.

“Commodities were trading fair and well,” a trader said. “So I don’t know if it rallied with that, [the] Trump comments, and whether they were overbought last week.”

In a video uploaded to YouTube on Monday, Trump mentioned “producing steel” as a possible tenet of his economic plan going forward.

One of the most significant uses of coal is steel production.

Seeing similar gains was Cliffs Natural Resources Inc., particularly in its 6¼% notes due 2040, which were up 4 points to 79, a market source said.

Murray Energy Corp.’s 11¼% notes due 2021 were unchanged at 71, a trader said.

Oil rises

The follow-up to final OPEC supply cut talks has garnered speculation in oil prices and tugged at distressed energy names in the process.

Distressed names continued to capitalize on the round number percentage spikes in oil futures on Tuesday, including Denbury Resources’ 6 3/8% notes due 2021, which were up 1¼ points to 84.

MEG Energy’s 7% notes due 2024 were up 1 point to 86½, a market source.

A trader said California Resources’ 8% notes 2022 were up 1¼ points to 75, and EP Energy Corp.’s 6 3/8% notes due 2023 were up ½ point to 66½.

GenOn Energy continued to fall.

Its 7 7/8% notes due 2017 were down 1¼ points to 73, a trader said, and its 9 7/8% notes due 2020 were down 1½ points to 68.

A market source said GenOn’s 9½% notes due 2018 were down 1 point to 72.

Since its Nov. 4 quarterly earnings report, NRG Energy Inc. has yet to speak further on options it is considering for GenOn – NRG’s affiliate – including bankruptcy.

Healthcare and pharma ‘firm’

Traders said the healthcare sector was firm on the day, particularly Community Health, which bounced up ¼ point to 82 7/8 in its 8% notes due 2019.

The company’s 6 7/8% notes due 2022 were up 1 point to 71.

Quorum Health “continues to run,” as one trader said, referencing the company’s 11 5/8% notes due 2023, which were up 2¾ points to 83.

In pharmaceuticals, Concordia International’s 9½% notes due 2022 were up 3/8 point to 43¾, a trader said.

Valent Pharmaceuticals’ 6 1/8% notes due 2025 were up 1/8 point to 78¼, and its 5 7/8% notes due 2023 were up ½ point to 78½.

Round up

Traders said that Avaya was one of the day’s biggest movers, but could not say why.

The technology company’s 7% notes due 2019 were up 4½ points to 85½ on 25 trades, a trader said.

Intelsat SA’s Jackson-linked 5½% notes due 2023 were up ½ point to 67 on a “handful of trades,” a trader said.

Shipping and logistics company Navios Maritime Holdings Inc. released its quarterly earnings on Tuesday and saw its 7 3/8% notes due 2022 react to the release. They were up 2¼ points to 58, a trader said.

iHeartMedia’s 14% notes due 2021 were up ¾ point to 41, a market source said, and its 9% notes due 2018 were up ½ point to 77 5/8.

Construction equipment renter Ahern Rentals Inc.’s 7 3/8% notes due 2023 were up 2¼ points to 74¼.

Down 1½ points on one trade were Gymboree Corp’s 9 1/8% notes due 2018 to 48½.

Caroline Salls contributed to this review.

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