Distressed oil and gas bonds mixed on crude moves; Intelsat stays busy, inches up; Valeant debt firms

By Stephanie N. Rotondo

Seattle, March 30 – The distressed energy space was moving around Wednesday along with crude oil prices.

Domestic crude spent most of the day in positive territory, as the dollar waned following Janet Yellen’s comments on Tuesday.

In her speech in New York, the Federal Reserve chairperson said the central bank should exercise caution when choosing to raise interest rates in the future. That resulted in a broad market rally on Tuesday, which extended into midweek trading, thus the initial easing of the dollar.

However, towards the bell, the dollar’s losses scaled back, which in turn put pressure on oil prices. But prices were off only a penny for the day, closing at $38.27 a barrel.

But as for distressed energy bonds, there was no clear path during the day’s session.

On the upside, Whiting Petroleum Corp.’s 5¾% notes due 2021 improved 1½ points to end at 66¾, according to a trader. The 5% notes due 2019 jumped almost 4 points to 69.

Linn Energy LLC’s bonds were also better. A trader said the 6½% notes due 2019 ticked up half a point to 11½. The 8 5/8% notes due 2020 closed at the same level, up a quarter-point.

Another market source pegged Chesapeake Energy Corp.’s 6 5/8% notes due 2020 at 41½, a gain of 2 points on the day.

As for the day’s downers, SandRidge Energy Inc.’s 8 1/8% notes due 2022 slipped a touch to 6. The dip came as the company said in a regulatory filing that it was talking with advisers about the possibility of entering bankruptcy.

Memorial Production Partners LP’s 7 5/8% notes due 2021 meantime declined a point to 28½. EP Energy Corp.’s 6 3/8% notes due 2023 dropped “3 and change” points to 45½, a trader said.

And, rounding out the weak list, W&T Offshore Inc.’s 8½% notes due 2019 also declined “3 and change” points to 12, the trader said.

However, he noted that the paper hadn’t traded in a couple of weeks.

In the preferred stock arena, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) experienced the largest percentage loss for the day, falling 59 cents, or 7.02%, to $7.82.

Intelsat busy, better

As has been the trend of late, Intelsat SA paper continued to be active. Unlike the previous two sessions, however, there was a clear trajectory for the company’s bonds.

The 6 5/8% notes due 2022 gained 1½ points to 52 3/8, according to a trader. The 7¾% notes due 2021 ticked up half a point to 30¼.

Another source saw the 6 5/8% notes at 51½ bid, up almost a point.

Though the name has been traded actively recently, there has not been any fresh news since the company sold $1.25 billion of 8% notes due 2024 on March 21.

Intelsat is a Luxembourg-based satellite services provider.

Valeant heads higher

Valeant Pharmaceuticals International Inc.’s term loans were stronger in trading on Wednesday as the company announced in a news release that it launched the process to obtain an amendment and waiver to its credit facility, according to a trader.

The term loans E and F were quoted at 94½ bid, 95 offered, up from 93¼ bid, 94 offered, and the term loans C and D were quoted at 95 bid, 95¾ offered, up from 93 5/8 bid, 94 5/8 offered, the trader said.

Also stronger on the day were the 6 1/8% notes due 2025 and the 5 7/8% notes due 2023, according to a trader. He deemed the former issue up a quarter-point at 77¼, while the latter issue gained over a point to close at 78.

“They had a little bounce,” the trader said.

Under the proposal, the company is asking to extend the deadline for filing its form 10-K to May 31, to extend the deadline for filing its form 10-Q for the quarter ending March 31 to July 31, and to waive the cross-default to its indentures that arose when the 10-K was not filed on March 15.

Additionally, the company is asking to revise the interest coverage maintenance covenant and some financial definitions to provide additional cushion in its financial covenants.

As part of the amendment, Valeant would increase pricing on all of its term loans by 50 basis points, a market source remarked.

The amendment would also restrict the company’s ability to make certain acquisitions and other investments and to pay dividends and other restricted payments until the financial statements are filed and specified leverage ratios are achieved and require that substantially all net asset sale proceeds be used to prepay its term loans.

Lenders are being offered a 50 bps amendment fee.

Consents are due on April 6, the source added.

Valeant, a Laval, Quebec-based specialty pharmaceutical company, needs approval from lenders holding more than 50% of the loans in principal amount for the amendment and waiver to pass.

Fannie, Freddie busy

Fannie Mae and Freddie Mac preferreds traded actively on Wednesday, though the securities were mixed for the day.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were steady at $2.98, while Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) added a nickel, or 1.7%, to close at $2.99.

A market source said he wasn’t sure what was causing the uptick in activity, though he added “if I had to pick a story/headline, it would be” an article published in Bloomberg citing Rafferty Capital’s Richard Bove.

In the article, Bove said that the GSEs were in a “woeful financial situation,” which could force the government to move “sooner rather than later” on housing reform, before a “catastrophe” hits.

Housing reform has struggled to gain traction in Congress, which has not been good for Freddie and Fannie stakeholders hoping to recoup some of their investments. Furthermore, the government’s 2012 “net worth sweep” of the GSEs’ profits has resulted in weak liquidity cushions for the mortgage backers, causing more concern among shareholders.

A bevy of lawsuits have been filed fighting the profit sweep, alleging that the government acted outside its purview as conservators.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
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