Energy XXI enters bankruptcy; second-lien debt gains; Breitburn Energy misses coupon

By Stephanie N. Rotondo

Seattle, April 14 – The distressed debt market – specifically the energy arena – was hit with another round of negative headlines on Thursday.

Energy XXI Ltd. announced that it had filed for bankruptcy protections early in the day. The company did so in order to implement a restructuring plan that has garnered the approval of about 63% of the company’s 11% second-lien noteholders.

As the latest casualty of a depressed commodity price environment, Energy XXI’s filing brings the total amount of defaulted debt in April to $14 billion, according to Fitch Ratings.

Still, the company’s bonds improved on the news.

Energy XXI’s 11% second-lien notes due 2020 popped Thursday after the Houston-based oil and gas explorer said it had filed for Chapter 11 protections.

A source placed the issue in a 24¼ to 24½ ZIP code, up from previous levels around 16.

Not so improved was Breitburn Energy Partners LP’s debt. The MLP said on Thursday that it was deferring the interest payments on its 7 7/8% notes due 2022 and the 8 5/8% notes due 2020 and was also cutting distributions on its preferred units.

Away from energy names, Fannie Mae and Freddie Mac preferreds continued to be actively traded on Thursday ahead of oral arguments in court on Friday. But while the preferreds had been trending higher, Thursday’s session saw the GSE-linked securities “looking a little more mixed,” a market source said.

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