Alta Mesa dips as company delays annual report; Intelsat gains after analyst upgrade

By James McCandless

San Antonio, April 3 – Energy and telecom names were the main focus of the distressed space on Wednesday.

Alta Mesa Resources Inc.’s notes dipped after the company informed the Securities and Exchange Commission that it would delay the release of its annual report.

Slightly lower oil futures gave way to a decline for Sanchez Energy Corp.’s issues while Ensco plc’s paper closed mixed and Denbury Resources Inc.’s notes improved.

Elsewhere, in telecom, Intelsat SA’s issues gained after receiving an analyst upgrade.

Sector peer Uniti Group Inc.’s paper was better after the company closed on a sale of South American assets.

Retailer Rite Aid Corp.’s notes continued to push lower as legal and sector pressures weigh on the name.

Chemicals producer Hexion Inc.’s issues were negative in the aftermath of its bankruptcy filing.

Dean Foods Co.’s paper was also on a downward path.

Alta Mesa dips

In the oil and gas space, Alta Mesa’s notes dipped in Wednesday activity, traders said.

Late Tuesday, the Houston-based independent oil and gas producer informed the SEC that it would delay the filing of its annual report.

The company said that it expects to report material weakness in its internal control over the financial reporting in its 2018 10-K filing.

It also expects to report a net loss of $2 billion for 2018, attributed to a non-cash impairment charge on its oil and gas properties that it pegs to weakened market conditions.

“This is the start of its death spiral,” a trader said. “They’ve got to gear up for some kind of exchange, probably a rights offering.”

Oil futures lose

Meanwhile, a slight loss for oil futures led to mixed behavior in popular oil and gas tranches, market sources said.

Houston-based producer Sanchez Energy’s issues saw a similar decline.

The 6 1/8% notes due 2023 shaved off ¼ point to close at 13¾ bid.

London-based contract driller Ensco’s paper closed mixed.

The 7.2% paper due 2027 picked up 1¼ points to close at 82½ bid. The 7¾% paper due 2026 lost 1¾ points to close at 85¾ bid.

Houston-based sector peer Denbury Resources’ notes closed higher.

The 6 3/8% notes due 2021 rose 2½ points to close at 80½ bid. The 5½% notes due 2022 gained 1½ points to close at 71½ bid.

On Wednesday, West Texas Intermediate crude-oil futures for May delivery lost 12 cents, ending the session at $62.46 per barrel.

North Sea Brent crude-oil futures for June delivery closed at $69.31 per barrel after a 6-cent decline.

Intelsat up

Elsewhere, in telecom, Intelsat’s issues saw a gain, traders said.

Intelsat Jackson Holdings SA’s 5½% notes due 2023 added ¾ point to close at 89¾ bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 picked up ½ point to close at 73½ bid.

On Wednesday, the Luxembourg-based satellite operator received a boost after an analyst at JPMorgan upgraded its common stock.

The analyst said that the market overreacted to recent news that the U.S. government was not ready to approve opening up the C-band spectrum to mobile phone network providers.

The potential move would create large revenue streams for operators like Intelsat.

“It’s been pointed out before, but a lot of people have a ton of money riding on Intelsat,” a trader said. “Anything positive after these last few weeks would have sent the structure up.”

Uniti better

Uniti’s paper saw a better session, market sources said.

The 8¼% paper due 2023 jumped up 3¼ points to close at 93½ bid.

The Little Rock, Ark.-based telecom-focused real estate investment trust announced on Tuesday that it had closed the sale of its South American tower portfolio.

The deal closed for approximately $100 million.

Rite Aid lower

Retailer Rite Aid’s notes continued a downward push, traders said.

The 6 1/8% notes due 2023 lost 1¾ points to close at 81½ bid.

On Tuesday, the 6 1/8% notes fell ¼ point.

The Camp Hill, Penn.-based drug-store chain came under pressure on Tuesday after competitor Walgreens cited sector weaknesses in its negative earnings report, creating repercussions for the drug retail space.

On the same day, the company was named in a whistleblower lawsuit that alleges that the company violated the False Claims Act by overcharging government programs for prescription drugs.

Hexion off

Hexion’s issues took a negative path in the Wednesday session, market sources said.

The 6 5/8% notes due 2020 lost 2½ points to close at 81¾ bid. The 10% notes due 2020 dropped 4¼ points to close at 81¼ bid.

The Columbus, Ohio-based chemicals producer’s issues have trended negative since filing for Chapter 11 bankruptcy on Monday.

The company also announced a restructuring plan, a highlight of which would see a $1.45 billion cash payout to first-lien holders.

Dean Foods down

In agriculture, Dean Foods’ paper saw a downward trend, traders said.

The 6½% paper due 2023 declined by 5 points to close at 60 bid.

While no news was out about the Dallas-based dairy product producer, it was pushed further into distressed territory on Wednesday.

“It’s been really weak for a while,” a trader said. “The feeling is that unless they update people on their alternative review soon, they’re in danger of filing.”

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