Walter Energy debt slips as bankruptcy looms; oil and gas bonds mixed amid oil price declines

By Stephanie N. Rotondo

Phoenix, June 8 – The distressed debt market was under pressure – albeit with limited liquidity – in Monday trading, as investors kept their eyes on a looming rate hike and the ongoing Greek drama.

“There wasn’t a ton of activity in anything really,” one trader said.

Also possibly weighing on volume was a lack of any fresh news or data. However, there is a dearth of information coming this week – including a retail sales report on Thursday – which could get things going.

Walter Energy Inc. was in the news, indicating a bankruptcy filing was on its way. The coal producer has been in talks with senior lenders for a couple months now trying to get a deal done.

The company had previously shot down other restructuring proposals sent by first-lien creditors, including Apollo Global Management LLC. Under Apollo’s plan, the company would convert debt into equity, handing ownership over to the creditors.

Despite saying last month that its ability to continue as a going concern was in doubt, it did make two interest payments on its junior debt in April. However, with another payment due on its 9 7/8% notes due 2020 on June 15, it seems unlikely that that coupon will get paid.

But it is unclear whether Walter will file for Chapter 11 prior to said payment or after.

During Monday’s session, a market source saw Walter’s 9 7/8% notes straddling 3, though trading was only in small pieces. Still, that was down from previous odd-lot trades around 6.

Elsewhere in the coal arena, Arch Coal Inc.’s 9 7/8% notes due 2019 inched up almost a point to 21.

As for the oil and gas sector, it ended the day mixed.

Swift Energy Co.’s 7 7/8% notes due 2022 were seen up a quarter-point at 44½, but Comstock Resources Inc.’s 9½% notes due 2020 were off a similar amount to 47¾.

Linn Energy LLC’s 7¾% notes due 2021 were meantime down a deuce at 82¼.

For its part, West Texas Intermediate crude declined 81 cents, or 1.37%, to $58.32 a barrel. Brent crude dipped 51 cents to $62.80.

The declines in oil prices came after OPEC said on Friday that it would hold production rates steady, despite the current volatility in the market. The market is waiting to see how U.S. stockpiles fared in a report due out Wednesday.

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