Windstream trades up in wake of default notice; California Resources comes in; iHeart mixed

By Stephanie N. Rotondo

Seattle, Sept. 26 – As was expected, Windstream Holdings Inc. was the nom du jour in the distressed debt market on Tuesday.

Late Monday, the company said in an 8-K filing that it had received a notice of default from a holder of the 6 3/8% notes due 2023. Though the company denied the default allegations, a trader speculated that it could bring about some volatility in the name come Tuesday.

The trader’s speculation proved correct as the telecom company’s debt was “obviously volatile and active on the back of that news.”

But the name was able to gain a little ground in trading, after seeing steady declines in recent weeks.

“People are still trying to determine if this really has teeth to it,” a trader said.

As for the rest of the day’s goings-on, it was more of the same, according to traders.

California Resources Corp.’s 8% second-lien notes due 2022 “continue to be active,” a trader said, seeing the issue slip a touch to end “around 65.”

Another trader also called the issue lower at 64¾.

He said that was down 1½ points.

The bonds have been trending up of late, helped in part by domestic crude oil prices that have moved above the $50-mark.

However, there was no fresh news out on Tuesday to cause the weakness.

Notably, Denbury Resources Inc. – another oil and gas name – continued to trade up.

Like CRC, there has been no specific news to push Denbury in either direction, though it too has followed an upward course.

In Tuesday trading, a trader said the 5½% notes due 2022 were 1¼ points higher at 56¾.

Another market source pegged the 6 3/8% notes due 2021 at 58, up 1½ points.

In iHeartCommunications Inc. paper, a trader said the 9% notes due 2019 were “pretty active,” moving up almost a point to 74¾.

The trader added that there were only “a handful of trades” in the 9% notes due 2022, which ended unchanged at 69¾.

But another trader said the bonds “continued to be weaker,” placing the 2019 issue “around 75” and the 2022 maturity “around 70.”

Windstream wobbles

Windstream’s debt whipsawed around on Tuesday as the market reacted to word of a default notice.

One trader saw the company’s 7¾% notes due 2020 rising 1½ points to 78, while the 6 3/8% notes ticked up a deuce to 68½.

The trader also saw Windstream’s Uniti Group Inc.-linked 8¼% notes due 2023 trading “very active,” ending at 89½.

He said that was a hair lower on the day.

At another desk, a trader said the 2020 paper hit a low of 77½ early in the day before rallying to levels around 80.

He said the bonds eventually went out in the high-70s.

As for the 2023 bonds, they traded as low as 65, but settled into a 67 to 68 context.

Late Monday, Windstream said it had received a default notice from a holder of the 6 3/8% notes. The default notice alleged that the company’s transfer of certain assets and the subsequent lease of those assets in connection with the spinoff of Communications Sales & Leasing Inc. – now known as Uniti Group – was a violation of the sale and leaseback covenant under the indenture.

The noteholder also alleged that the company violated a restricted payment covenant.

The company has said that the claims are without merit.

As for sector peer Frontier Communications Corp., those bonds were also trading up.

A trader said there was “heavy volume” in the company’s 11% benchmark notes due 2025, which finished up 1½ points at 83¼.

Another trader also called the issue better, seeing the bonds adding “over a point” to close at 83.

Yet another market source deemed the 7 5/8% notes due 2024 up a quarter-point at 76.

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