Chesapeake churns on asset-sale delay, ATP off after disappointing earnings, MEMC also

By Paul Deckelman

New York, May 11 - Chesapeake Energy Corp.'s recently struggling bonds were again getting clobbered on Friday, on heavy volume, in tandem with a plunge in its stock.

The latest Chesapeake churning followed the news that the natural gas company may have to delay some previously scheduled asset sales to preserve cash flow needed to comply with its credit facility covenants.

That endangers its strategy of using such sales to close the big gap between operating revenues and its heavy capital spending and debt repayment requirements.

Traders saw ATP Oil & Gas Corp.'s junk bonds trading off on active volume for a second consecutive session, after the offshore energy exploration and production company reported less-than-stellar quarterly earnings that even company executives admitted were a disappointment.

Disappointing quarterly earnings also hurt the bonds and shares of MEMC Electronic Materials Inc., a maker of wafers and other components used in electronic applications.

In the bank debt market, directory publisher SuperMedia Inc.'s term loan lost ground ahead of the Monday deadline for its term loan buyback offer.

Chesapeake chopped up

Among specific names, a trader said that Chesapeake Energy's bonds were multiple points lower, on active volume.

"The bonds dropped at least two or three points on really good volume," a trader said about an hour before the close. "And they could trade down another one or two."

For instance, he saw the Oklahoma City-based company's 6 5/8% notes due 2020 falling to 95 bid, which he called a 3-point loss on the day on relatively busy volume of $9 million or $10 million, making it one of the busier issues in the junk realm.

As usual, the company's 6.775% notes due 2019 sold earlier this year were even busier, with at least $20 million changing hands. The bonds were "off a couple," a trader said, trading in a 94-96 context.

Even busier was its 9½% notes due 2015 on "a lotta volume," a trader said. Turnover was at least $23 million with the bonds falling to 105 bid, 106 offered, down 2½ points on the session.

Another trader saw the 6 5/8% notes "definitely lower," quoting them as low as 93 or 94 and estimating the loss at 4 points.

The 6.775s were pretty active, around the 95 neighborhood, he said.

Chesapeake, the second trader said, "has been chock full of interesting news lately." Adding to the news was the announcement that it would be delayed in submitting its 10-Q quarterly filing to the SEC, although it subsequently did file.

Even more damaging was another company disclosure: Chesapeake warned that it may have to delay some planned asset sales in order to maintain adequate cash flow and stay in covenant compliance.

Although Chesapeake would expect to make money from the sale of some of its far-flung assets, loss of the cash flow from those properties could threaten its ability to remain in compliance with maintenance covenants to its credit agreement.

However without those asset sales, Chesapeake will not be able to meet its own ambitious targets for raising money for capital expenditures or debt repayment.

The company has been selling some of the assets it aggressively accumulated over the past few years in order to tide it over a revenue shortfall caused by historically low natural gas prices.

"If they're bumping up against their covenants, that can't be good," the trader said.

"As more and more stuff is coming out about them, it's raising [investor] concerns."

Stock investors were just as dismayed at the latest turn of events; Chesapeake's New York Stock Exchange-traded shares swooned by $2.37, or13.80%, to end at $14.81.

Volume of 85 million shares was more than 3.5 times the usual turnover.

ATP off again

Also in the energy sphere, a trader declared that ATP Oil & Gas Corp.'s 11 7/8% senior secured second-lien notes due 2015 were among the volume leaders, along with the Chesapeake bonds.

More than $12 million of those bonds traded, putting the credit high up on the junk most-actives list.

As was the case Thursday, the bonds were lower in the wake of the disappointing quarterly numbers reported by the Houston-based offshore energy exploration and production company.

"They were just getting brutalized," a trader said, quoting the notes at 67 bid, which he said was down 5 points from recent levels in the low- to mid-70s.

"They were getting hammered," another trader said, seeing the bonds trading between 66¾ and 673/4.

ATP released its first quarter results after the financial markets closed Wednesday, followed by a Thursday conference call.

In the latest period ended March 31, the company recorded a net loss attributable to common shareholders of $145.1 million or $2.83 per basic and diluted share - wider than the $119.5 million or $2.34 per basic and diluted share of red ink seen a year ago in the first-quarter of 2011.

Revenue of $146.6 million fell short of Wall Street expectations by $32 million. Even the company's chairman and chief executive officer, T. Paul Buhlman, opened his conference call presentation by stating that the company was not pleased with those first-quarter results.

MEMC gets mauled

Another bond taking its lumps Friday due to poor earnings was electronic components company MEMC Electronics Materials.

More than $11 million of the company's bonds traded.

A trader said the bonds dropped to 69 bid to start the day's dealings, down from levels around 71-71¼ on Thursday.

"They were trading there in a 69-71 context all day long," he said, although he saw the bonds moving up later in the day to around 71, calling them unchanged on the session.

The St. Peters, Mo.-based company said earlier in the week that during the quarter ended March 31, it reported a net loss of $92 million, or 40 cents per share, far worse than its loss of $4.5 million, or 2 cents per share, in the same period a year earlier.

Super Media not so super

In the bank debt market, SuperMedia's term loan fell to 57¾ bid, 58¾ offered from 58 bid, 59 offered ahead of the Monday deadline for its term loan buyback offer, according to a trader.

Under the proposal, the Dallas-based directory publishing company is tendering for its term loan in a price range of 55 to 59 and the cash size of the offer is $33 million.

JPMorgan Chase Bank is the administrative agent on the deal.

Sara Rosenberg contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.