Monday, November 4, 2019

Distressed Debt Watch - November 2019

Previously in September.

  • Approach Resources (AREX, EDGAR) bond due June 2021 traded at 30 cents for a yield to maturity of over 100%. They are still in forbearance with the lenders. The stock is down to 10 cents - a market capitalization of $10 million.
  • Frontier Communications (FTR, EDGAR) bond due April 2020 is trading at 63 cents, a yield to maturity of almost 150%. At a $1 share price, the market capitalization is a bit over $100 million. The September 2020 bond is trading at 50 cents, a yield to maturity of over 100%. The January 2021 $1 put is offered at 60 cents and the $2 put is offered at $1.55. The Q3 results are supposed to be released after the close on November 5th. The big debt maturity ($2.2 billion) isn't for three years but some creditors are trying to get them to restructure early.
  • J.C. Penney (JCP, EDGAR) bond due November 2023 trading at 58 cents, yielding 24%.
  • Denbury Resources Inc. (DNR, EDGAR) bond due July 2023 trading at 43 cents, yielding 33%.
  • California Resources Corp (CRC, EDGAR) bond due January 2020 is trading at 89 which is a ytm of 70%. The 2021 bond is trading at 36 cents which is a yield of 73%. The 2024 bond is trading at 29 cents. The market capitalization at a $9.61 share price is $471 million. Most recent quarter (Q3) their operating income was $148 million vs interest expense of $95 million. So far this year their capital expenditures are running ahead of depreciation, depletion, and amortization by $36 million. Long term debt and other LT liabilities of $5.6 billion is 9.4x the mrq's annualized operating income. There are only $100 million of the January 2020 notes and $100 million of the September 2021 notes. The biggest chunk of the capital structure is $1.84 billion of 8% notes due in December 2022. These are trading in the 40 cent range. (In Q3 they repurchased $153 million face value of the 2L notes for $90 million in cash.) The Second Lien Notes require principal repayments of $290 million in June 2021, $58 million in December 2021, $61 million in June 2022 and $1,429 million in December 2022. So, there is not much debt maturing prior to the second half of 2021. The Jan 2021 $10 put has increased to ~$5.30. The Jan 2022 $5 put is $2.60.


jHurt said...

you missed MDR!

Anonymous said...

Frontier Communications Corp. has started
the search for new management to take over the company after it
completes what could be the biggest telecom restructuring in
nearly two decades, according to people with knowledge of the
Advisers for the rural wireline telephone provider have
started looking for a possible replacement for Chief Executive
Officer Dan McCarthy, who has led Frontier since 2015, the
people said. They asked not to be identified discussing a
confidential matter.
A representative for the Norwalk, Connecticut-based company
said it doesn’t comment on rumors or speculation. McCarthy
couldn’t be reached for comment.
Frontier’s bonds fell across the curve, with its 11% bonds
due September 2025 dropping to a record low of 44.75 cents on
the dollar to yield nearly 33%, according to Trace data.
Frontier is in talks with advisers about solutions to its
$17.5 billion debt load, which has swelled in recent years as
people stop using land lines. Creditors have been pushing
Frontier for a plan, which could include bankruptcy.

Due Diligence

Telecom consulting firm Altman Vilandrie & Co. has been
hired by creditors to conduct due diligence on Frontier,
including the development of a post-reorganization business
plan, the people said. The company could file for bankruptcy in
the first quarter of 2020, ahead of more than $300 million of
interest due in March, the people said.