Ultra Petroleum falls as negotiations stall, borrowing base cut; Community Heath up

By James McCandless

San Antonio, Sept. 26 – Distressed debt trading shifted focus toward energy names on Wednesday as oil futures ended mixed and U.S. oil inventories rose for the first time in six weeks.

Taking much of the spotlight on Wednesday was Ultra Petroleum Corp., which reported late Tuesday that it was working to renegotiate the terms of its senior secured first-lien term loan and borrowing base.

The oil developments of the day led to mixed results in other independent oil and gas names, namely California Resources Corp. and Sanchez Energy Corp., both bellwethers of the sector. Petroleum transporter Navios Maritime Holdings Inc. declined.

Elsewhere, in the medical sector, Community Health Systems, Inc.’s notes traded upward on news that a subsidiary would pay $260 million to settle criminal charges with the Department of Justice.

Fitch Ratings said that American Tire Distributors Inc. could file for bankruptcy at the end of the month as they are at the end of a 30-day grace period after failing to make a Sept. 1 interest payment. The company's bonds, while higher than their recent 24½ floor, declined.

In distressed telecom, Intelsat SA’s notes gained while Frontier Communications Corp.’s issues were mixed.

Meanwhile, the Fresh Market Inc.’s paper saw a boost after the private company reported its earnings late Tuesday.

Energy issues mixed

Ultra Petroleum’s notes declined on Wednesday, a trader said, coming into the forefront after the company disclosed the status of stakeholder negotiations late Tuesday.

The 6 7/8% notes due 2022 lost 2¼ points to close at 47¼ bid.

On Tuesday, the Houston-based company disclosed that it has been holding discussions with certain holders of its senior secured first-lien term loan about a transaction that could amend its terms. The company said that negotiations had been halted because of a failure to reach a deal.

It also disclosed that its lenders had slashed its borrowing base on its credit facility by $100 million, leaving it at $1.3 billion.

“The first-lien is a part of that facility so they’re not as covered as you would think,” a trader said.

“The situation doesn’t seem like it’s going to get better,” another trader said. “They’re stranded with three underperforming rigs and they’re going to have to start burning cash like crazy to stay up. They’re also a cheap target in distressed trading.”

Also affecting the energy sector was a mixed day in oil futures and a report that showed increasing U.S. oil inventories for the first time in six weeks, though with mixed results.

Los Angeles-based peer California Resources’ notes declined, market sources said.

The 6% notes due 2024 lost ½ point to close at 86¾ bid. The 8% notes due 2022 shaved off ¼ point to close at 95½ bid.

On Tuesday, the 6% notes added ¾ point and the 8% notes rose 2¾ points.

Another Houston-based producer, Sanchez Energy, saw its paper improve.

The 6 1/8% paper due 2023 gained 2½ points to close at 57½ bid.

One name moving lower throughout the week was Monaco-based petroleum transporter Navios.

Its 7 3/8% notes due 2022 lost ¼ point to close at 78¾ bid.

“There’s no news behind it, but it’s been trading like crap all week,” a trader said.

West Texas Intermediate crude oil futures picked up 45 cents per barrel in trading to settle at $72.02 with the North Sea Brent crude oil last shedding 12 cents to end at $81.75. Domestic crude supplies rose by 1.9 million barrels at the end of last week, according to the Energy Information Administration.

Community Health gains

Elsewhere, Community Health’s bond issues were gaining in secondary trading on Wednesday, market sources said.

The 7 1/8% notes due 2020 rose 1¼ points to close at 88½ bid. The 6 7/8% notes due 2022 gained 1 point to close at 57½ bid.

The gains come despite the company’s late Tuesday announcement that subsidiary Health Management Associates would pay $260 million to the Department of Justice to settle criminal charges. The segment is alleged to have paid physician kickbacks and defrauded Medicare, Medicaid and other federal programs.

In response, Moody’s Investors Service said that the payment would “severely weaken” the parent company and potentially violate the terms of its credit agreement.

“This is not a company that can afford this kind of thing,” a trader said. “It’s the last thing they need.”

Community Health is a Franklin, Tenn.-based hospital operator.

American Tire lower

American Tire’s notes saw a decline, traders said.

The 10¼% notes due 2022 lost ½ point to close at 25¾ bid.

The notes had been recently trading at a low point of 24½ bid, which some traders had taken to calling a floor created by a single buyer.

“It’s off of that floor, but with this news I wouldn’t expect it to rise any higher,” a trader said. “It’s going to hover around the 25 level for quite some time.”

On Wednesday, Fitch Ratings said that the company was risking bankruptcy by the end of the month after entering a 30-day grace period for not making an interest payment due Sept. 1.

American Tire is a Huntersville, N.C.-based tire distributor.

Telecom names diverge

Distressed telecom names remained at the forefront of distressed trading.

Intelsat’s notes continued an upward trend, market sources said.

The Intelsat Jackson SA 5½% notes due 2023 picked up ½ point to close at 92¼ bid. The Intelsat (Luxembourg) SA 8 1/8% notes due 2023 gained 1¼ points to close at 88½ bid.

Frontier Communications’ notes continued a volatile week with mixed movements on Wednesday largely declining.

The 7 5/8% notes due 2024 lost ¾ point to close at 64½ bid. The 10½% notes due 2022 remained flat at 89¼ bid. The 11% notes due 2025 lost ¾ point to close at 77½ bid.

Fresh Market gains

Greensboro, N.C.-based grocer Fresh Market’s paper saw a multi-point boost after the private company reported earnings late Tuesday.

The 9¾% notes due 2023 jumped up 5 points to close at 73¾ bid.

“The numbers aren’t public, but the bondholders seem to be happy,” a trader said.

© 2015 Prospect News.
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