Avon looking to sell equity; Quiksilver bonds jump on filing news; Basic Energy debt declines

By Stephanie N. Rotondo

Phoenix, Sept. 10 – Distressed bonds continued to be firm on Thursday, but it was more of a mixed bag for topical names.

Avon Products Inc. was mixed as it was reported the struggling cosmetics company was in talks with private-equity firms in regards to a stake sale.

Meanwhile Quiksilver Inc. paper “popped...a lot,” a trader said, after the company filed for Chapter 11 protections late Wednesday.

In the energy space, Basic Energy Services Inc. bonds were down a considerable amount – as much as 5 points, according to one trader – as the oil well services company released its August operations update.

Also, Chesapeake Energy Corp. continued to be active. The name has been busy – and better – since announcing a new gas gathering agreement with the Williams Cos. on Tuesday.

Avon’s stake sale

Avon Products is reportedly in talks with such private-equity firms as Cerberus Capital Management and Platinum Equity in regards to a private equity investment, The Wall Street Journal reported Thursday.

On the heels of the news, Avon’s bonds were given mixed reviews.

At one desk, a trader said the 7.7% notes due 2043 were “unchanged, maybe up a tick” at 76¼. However, he said the 5.35% notes due 2020 were “down a half point from a week ago,” trading at 83.

Another trader said the 7.7% notes due 2043 were “about unchanged,” trading “around 76.”

Avon’s equity (NYSE: AVP) meantime dropped 43 cents, or 9.49%, to $4.10.

Avon is currently soliciting bids for participation in a PIPE. It has not been disclosed how much the company is seeking to raise.

The New York-based company has been attempting to turn itself around as its U.S. sales have dwindled. In June, the company inked a new five-year $400 million credit line, but that came with stricter covenants.

At the end of June, the company had $697 million in cash and equivalents, which compared to $961 million at the end of 2014.

Quiksilver jumps

Quiksilver, a Huntington Beach, Calif.-based surfwear company, filed for bankruptcy late Wednesday.

The filing was a so-called “prepackaged” deal that would swap out $279 million of secured bonds for new equity.

Oaktree Capital Management holds about 73% of that debt, meaning the deal will effectively place the private equity firm in charge.

Oaktree – acting alongside Bank of America – has also agreed to provide $175 million in debtor-in-possession financing.

A trader said the company’s 7 7/8% notes due 2018 had fallen into the “lower-70s” on Wednesday, but ahead of the news. He was not sure what had caused the decline.

“I don’t know if it was a short-squeeze or what,” he said.

Post-news, the bonds jumped, trading in a range of 83 to 87, according to the trader.

A second trader said the paper was up 15 points at 86½. He said the bonds had traded as low as 71 on Wednesday, but noted that the debt had been trading around 86 prior to that.

Basic backs up

Fort Worth-based Basic Energy issued an operations update for August late Wednesday. Come Thursday, the company’s bonds were sliding.

A trader said the 7¾% notes due 2022 dropped 5 points to 58, while the 7¾% notes due 2019 lost nearly 3½ points to end at 60 5/8.

Basic Energy reported that its well servicing rig count held steady in August at 421. A rig utilization rate of 53% was better than that seen in July – 52% – but well below the 74% mark seen in August 2014.

Drilling rig days were also better month over month, but less than year-ago comparables.

Additionally, the company said that “due to the recent volatility we experienced in August and our outlook for September, we now expect that our third quarter 2015 revenues will be 3% to 5% lower sequentially.”

Chesapeake rallies on

Chesapeake Energy remained on the radar on Thursday as investors continued to push the paper higher.

A trader said the 5 ¾% notes due 2023 were “pretty active,” inching up almost half a point to 77 7/8. The 4 7/8% notes due 2022 were just over half a point better at 76.

The bonds began to improve on Tuesday as the company announced a new gas gathering agreement with The Williams Cos. and some of its subsidiaries.

Under the new agreement with Williams and its units, Chesapeake will move to a fixed-fee on both its Haynesville shale operating unit and at its dry gas Utica Shale asset in 2016. Fees at the Haynesvile property will also be reduced, allowing existing minimum volume obligations to be met.

Chesapeake will also be obligated to increase the number of online wells at Haynesville by 140 over the next two years.

Chesapeake is an Oklahoma City-based oil and gas company.

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