Intelsat mixed after exchange offer, proposed merger with OneWeb dissolves; Hertz higher

By Colin Hanner

Chicago, June 1 – Intelsat SA was the distressed debt market’s most notable issue on Thursday following a terminated exchange offer that will most likely end the proposed merger between the company, OneWeb and SoftBank.

Bonds of Intelsat’s subsidiaries moved in both directions on the day.

Hertz Corp.’s $1.25 billion five-year notes fared well in the secondary market following pricing on Wednesday, and existing issues were mixed after across-the-board gains a day prior.

Exploration and production companies were lifted by a shimmer of good news coming out of the Energy Information Administration on Thursday, with crude prices rising on lower crude output by the United States.

California Resources Corp. and Denbury Resources Inc. were both higher, among others.

Following a merger between offshore drillers Atwood Oceanics Inc. and Ensco plc on Tuesday, both remained in the mix, though movement, if any, varied for both.

Intelsat off

Intelsat’s exchange offer deadline, which had been pushed back three separate times since mid-April, as well as amended several times, was terminated on Thursday following an extremely low turnout rate.

The exchange ended at 11:59 p.m. ET on May 31 after being extended several times amid response rates of less than 1%.

On the day, Intelsat Jackson Holdings SA’s 7¼% notes due 2020 were up “almost 1 point” to 91 7/8, a market source said.

Intelsat Luxembourg Holdings SA’s 8 1/8% notes due 2022 were down 1 point to 52.

In late February, Intelsat and OneWeb LLC announced that a share-for-share transaction agreement would effectively combine the two companies.

As part of the merger, an exchange offer for Intelsat’s Jackson, Luxembourg and Connect Finance subsidiaries was also announced, and, combined with Softbank’s investment, were “intended to reduce Intelsat's debt by approximately $3.6 billion, assuming the minimum level of participation in the debt exchange offers is achieved,” a news release said.

Now, Intelsat expects that OneWeb and SoftBank will exercise their respective termination rights under the combination agreement, according to a company update on Thursday.

“There were many stakeholders’ interests that needed to be satisfied in this complex transaction,” Intelsat chief executive officer Stephen Spengler said in the company press release. “We are disappointed that our bondholders were unwilling to accept the terms of the exchange offers presented over the course of this process.”

Hertz steadily higher

A rising tide lifted all boats on Wednesday once Hertz’s upsized $1.25 billion issue of five-year second-lien secured notes priced, though that trend ceased in Thursday’s session.

The new 7 5/8% notes due 2022 were up 7/8 point to 100 5/8, a market source said.

Existing paper for Hertz was mixed.

Its 5 7/8% notes due 2020, Wednesday’s most active issue, were up ¾ point to 94¾, followed by the 7 3/8% notes due 2021, which were up ¼ point to 94¾.

The 6¾% notes due 2019 were unchanged at 100 3/8.

Part of the new issue’s proceeds will go toward redeeming those 6¾% notes due 2019, as well as the car rental company’s 4¼% notes due 2019 and other debt.

E&P up with crude reduction

The pendulum of crude oil prices swung in the positive direction on Thursday following weekly figures by the Energy Information Administration, which showed that weekly crude output figures for U.S. crude inventories were lower by 6.43 million barrels for the week of May 21.

E&P companies followed the bright news.

California Resources’ 8% notes due 2022 were quoted at 75¾ bid, 76¼ offered, a market source said. A trader said the notes were up 1 point to 76.

Canadian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were up ¼ point to 87¼.

Denbury Resources’ 6 3/8% notes due 2021 were up ½ point to 77¾.

And Houston-based EP Energy Corp.’s 9 3/8% notes due 2020 were up ¾ point to 91¼.

Atwood, Ensco eyed

Following a merger between the two oil drilling contractors on Tuesday, Ensco and Atwood Oceanics continued to trade.

For the second-straight session, Atwood’s 6½% notes due 2020 were unchanged at 100¾, a trader said.

And, after a 1-point decline a day prior, Ensco’s 4½% notes due 2024 were up 3/8 point to 82 7/8.

Its 5.2% notes due 2025 mirrored the 3/8-point gain and finished at 85 3/8.

Distressed roundup

Franklin, Tenn.-based hospital group Community Health Systems, Inc., which divested five hospitals after the market close on Tuesday, saw a ½-point downturn in its 6 7/8% notes due 2022, which finished at 88½.

In a related sphere, Tenet Healthcare Corp.’s 6¾% notes due 2023 were up 3/8 point to 99 7/8.

Helicopter transport company Bristow Group Inc.’s 6¼% notes due 2022 were down ½ point.

And upscale retailer Neiman Marcus Group, Inc.’s 8% notes due 2021 were up 1½ points to 53¼.

Susanna Moon contributed to this review

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