Frontier fall continues; energy names off as crude falls; iHeart off after numbers; retailers retreat

By Paul Deckelman

New York, Nov 8 – Bonds of distressed and underperforming companies were lower across the board on Wednesday, traders said, amid an overall retreat in the larger junk bond market.

Among the major losers, a second straight session of lower crude oil prices finally caught up with previously strong energy-related names such as California Resources Corp., Denbury Resources Inc. and undersea oil and natural gas driller Transocean Inc.

Telecommunications names such as Frontier Communications Corp. and CenturyLink, Inc. were off – CenturyLink after having posted lower third-quarter earnings Wednesday and Frontier continuing its recent slide on disappointing results.

Also in the communications sphere, broadcaster and outdoor advertising company iHeart Media Inc. was off after weak numbers.

Retailers Rite Aid Corp. and PetSmart Inc. were also among the weaker issues, as was hospitals operator Community Health Systems Inc.

Most issues weaker

Away from the new deal, a trader said that “a lot of things were weak today,” citing a generalized feeling of market uncertainty due to a number of factors, including weakness in other financial markets, and continued daily outflows from high-yield mutual funds and exchange-traded funds – he noted that “we saw over $1 billion of outflows last week, and we’re tracking the same for this week,” with flow numbers for the reporting week ended Wednesday scheduled to be released on Thursday afternoon.

On top of that, he noted “some anxiety about the tax bill” now being worked on in Congress, particularly in regards to how “it might affect how some companies deduct interest payments – for higher yielding companies, that could be a significant blow,” depending on what the final bill coming out of the congressional sausage factory will look like.

Add to that concern about the direction the Federal Reserve may take with a new chairman and possibly several new governors, and “there’s uncertainty in the market.”

Communications names crushed

Windstream Holdings Inc.’s new 8 5/8% first-lien senior notes due 2025 continued to struggle on Wednesday, falling another ½ point or more into a high 95ish bid context, with over $43 million having changed hands.

The Little Rock, Ark.-based telecommunications company had priced $400 million of those notes as an add-on on Monday at 99 bid to yield 8.802%, and they began falling below their issue price right out of the chute when they hit the aftermarket, continuing their slide on Tuesday and again on Wednesday

Meanwhile, established telecom names were doing no better, particularly Stamford, Conn.-based wireline and broadband provider Frontier Communications, whose bonds have been moving lower ever since reporting disappointing quarterly earnings last week.

A trader said its notes were “pretty weak all day, although they rebounded a little off their lows” for the session.

Even so, its benchmark 11% notes due 2025 fell by another 11/16 point, ending at 77¼ bid, with over $34 million having traded, while its 10½% notes due 2022 did even worse on the day, swooning by 1½ points to close at 80 1/8 bid, with over $27 million of volume.

Frontier’s 8½% notes due 2020 were likewise 1½-point losers on the session, ending at 93½ bid, as over $18 million traded.

Fellow wireline operator CenturyLink’s 7½% notes due 2024 plunged by more than 3 points, to 97 3/8 bid, with over $21 million traded. The Monroe, La.-based company reported that its third-quarter net earnings declined to $228 million, or 42 cents per share, from $305 million, or 56 cents per share, a year ago. The per-share figure came in below analysts’ expectations.

And its revenues also slid to $4.03 billion from $4.38 billion in the year-earlier quarter.

CenturyLink’s 5.8% notes due 2022 cascaded down to 93½ bid, a nearly 4-point loss on the day, with over $18 million traded.

Sprint Corp.’s notes continued to slide in the aftermath of the recently announced end of its merger talks with sector peer T-Mobile (US) Inc.

“Those talks blew up – and everything has been weaker,” a trader said.

Its 8¾% due 2032 ended off by 1¾ points, at 112 bid, on volume of over $16 million, while the Overland Park, Kan.-based wireless carrier’s 7 5/8% notes due 2025 fell by ¾ point, to 105 bid, on $11 million of volume.

He also saw the company’s 6 7/8% notes due 2028 finishing “just south of par,” in a 99-to-100 bid context, down 1 point on the day.

iHeart off on losses

Struggling iHeart Media “put up weaker numbers than expected, a trader said, in seeing the San Antonio, Texas-based radio broadcaster and outdoor advertising company’s notes losing ground.

Its 9% notes due 2019 ended at 71 3/8 bid, down 5/8 point, while its 9% notes due 2021 lost more than ½ point to end at just over 69 bid, with around $19 million of each traded.

iHeart lost $248.2 million in the third quarter, far more red ink than the $35 million that it lost a year ago at this time. Revenues fell to $1.54 billion from $1.57 billion in the 2016 third quarter.

The company continues to wrestle with its more than $20 billion of accumulated debt, warning on Wednesday that “our current forecast indicates we will continue to incur net losses and generate negative cash flows from operating activities as a result of our indebtedness and significant related interest expense.”

It was evaluating whether it can continue as a “going concern.”

Hospitals, retailers retreat

Elsewhere, Franklin, Tenn.-based hospital operator Community Health Systems, Inc.’s notes fell again, a trader said, after a ratings downgrade.

“They’ve been under pressure for weeks, down around 10 or 12 points since August.”

One Wednesday, its 6 7/8% notes due 2022 lost more than 1¾ points to end at 64¾, on over $29 million of volume.

In the retailing sphere, a trader saw Phoenix-based pet food and supplies seller PetSmart’s 7 1/8% notes due 2023 down more than ½ point at 71½ bid, on volume of over $27 million, while its 5 7/8% notes due 2025 likewise lost ½ point to close at 84¾ bid with over $20 million changing hands.

Camp Hill, Pa.-based drugstore operator Rite Aid’s 6 1/8% notes due 2023 were down 1 1/8 points on the day at 89 bid, on volume of over $12 million.

© 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.