Intelsat notes lower amid revenue worries; L Brands improves on talk of asset sale

By James McCandless

San Antonio, Jan. 29 – By the end of the Wednesday distressed debt session, names in the telecom and retail sectors were the key drivers.

Intelsat SA’s notes moved lower amid increasing worries of a reduced revenue stream from a C-band spectrum auction.

Sector peer Frontier Communications Corp.’s issues were lifted.

Meanwhile, in retail, L Brands, Inc.’s paper shot up after news broke that its chief executive officer is considering stepping down and selling off Victoria’s Secret.

Department store chain Bed Bath & Beyond Inc.’s notes were under pressure.

In utilities, PG&E Corp.’s issues were active but unchanged as the company announces more support for its restructuring plan.

Oil and gas producer Chesapeake Energy Corp.’s paper improved after reporting preliminary fourth-quarter production results.

As crude futures varied in direction, EQT Corp.’s and Antero Resources Corp.’s notes also diverged while Extraction Oil & Gas, Inc.’s issues slid.

Intelsat plunges

Intelsat’s notes were seen moving lower through the day’s activity, traders said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 crashed 10¼ points to close at 41¼ bid. The 9½% senior notes due 2023 lost 10¼ points to close at 53¼ bid.

About $125 million changed hands by the close.

The Luxembourg-based satellite operator’s structure saw more weakness on Wednesday after more details emerged on a U.S. Senate proposal that would limit the amount of revenues that the company and its peers would receive from a c-band spectrum auction.

The Spectrum Management and Reallocation for Taxpayers Act would limit the proceeds going to operators at $1 billion.

A $6 billion fund would be allocated to paying for relocation off of the spectrum while more funds would be pegged for deficit reduction and the improvement of rural broadband networks.

This all comes despite a sustained lobbying effort by Intelsat and its counterparts as part of the C-Band Alliance, which estimated that an auction could generate as much as $77 billion in revenue.

“They’ve been shredded over the last few days,” a trader said. “I think the paper stays at their current levels while people reevaluate their revenue potential.”

Norwalk, Conn.-based wireline communicator Frontier’s issues were lifted.

The 10½% senior notes due 2022 rose ½ point to close at 45¼ bid. The 11% senior notes due 2025 added ¾ point to close at 45¼ bid.

L Brands up

Meanwhile, in the retail space, L Brands’ paper shot up, market sources said.

The 6¾% senior notes due 2036 improved by 3¾ points to close at 96½ bid. The 5¼% senior paper due 2028 picked up 1½ points to close at 99 bid.

Early Wednesday, news broke that the Columbus, Ohio-based retailer’s CEO, Leslie Wexner, is in talks to resign.

As part of the talks, the company may fully or partially sell its sluggish Victoria’s Secret segment to private equity name Sycamore Partners.

Quarter-by-quarter, the brand has seen successive drops in comparable store sales.

Activist investors have been pushing the company to sell off Victoria’s Secret for months.

Union, N.J.-based department store chain Bed Bath & Beyond’s long-term notes were under pressure.

The 5.165% senior notes due 2044 shaved off ¾ point to close at 74½ bid. The 4.915% senior notes due 2034 dipped ¾ point to close at 81¼ bid.

PG&E active, flat

In utilities, PG&E’s issues were active but ultimately unchanged, traders said.

The 6.05% notes due 2034 held level at 115½ bid.

The San Francisco-based bankrupt electric utility announced on Wednesday that it had secured additional support for its restructuring plan, now having the backing of two-thirds of its noteholders.

The restructuring agreement received the support of a large number of creditors last week, convincing a group to shelve its opposing plan.

The plan still requires the approval of California governor Gavin Newsom, who again stated on Wednesday that the state could take over the company if it did not include the changes his government wants in the restructuring plan.

Talks between the two parties are ongoing.

Chesapeake improves

Oil and gas name Chesapeake Energy’s paper improved, market sources said.

The 11½% senior notes due 2025 tacked on 1¼ points to close at 83½ bid. The 7% senior notes due 2024 rose 2½ points to close at 55 bid.

Before trading opened on Wednesday, the Oklahoma City-based independent oil and gas producer released preliminary fourth-quarter production numbers.

The company estimated an average equivalent production of 476,000 to 478,000 barrels of oil, higher than its average daily production of 464,000 boe.

Its average production range was set at 125,000 to 126,000 barrels of oil per day.

Futures vary

On a day of crude futures varying in direction, distressed energy tranches saw similar movements, traders said.

West Texas Intermediate crude oil futures for March delivery slipped 15 cents to settle at $53.33 per barrel.

North Sea Brent crude oil futures for March delivery finished at $59.81 per barrel after a 30 cent pickup.

Pittsburgh-based producer EQT’s notes were seen diverging.

The 6 1/8% senior notes due 2025 garnered 1½ points to close at 93½ bid. The 7% senior notes due 2030 lost 2½ points to close at 90 bid.

Denver-based peer Antero Resources’ issues were mixed.

The 5 5/8% senior notes due 2023 dropped 1¼ points to close at 74 bid. The 5 1/8% senior notes due 2022 improved by ½ point to close at 88 bid.

Extraction Oil & Gas, another Denver-based producer, saw its paper slide.

The 7 3/8% senior notes due 2024 declined by 2½ points to close at 50½ bid.

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