Halcon Resources’ debt gains on prepackaged news; Valeant bonds drift lower; Caesars also weakens

By Stephanie N. Rotondo

Seattle, May 19 – The distressed debt market was trading off Thursday, in line with the broader markets.

“ETFs were throwing out everything but the kitchen sink today,” a trader said. He opined that the reason was because the funds “loaded up on bonds and couldn’t offset that with the index.”

Halcon Resources Corp., however, bucked the overall trend. The company’s debt popped after a prepackaged bankruptcy plan was announced.

The looming filing brings the list of oil and gas companies currently under bankruptcy protections to over 60.

Away from Halcon, it was just a downhill slide, with or without news.

Valeant Pharmaceuticals International Inc., for instance, weakened after pushing up on Wednesday on news the struggling drug company was considering asset sales to cut its debt load.

Caesars Entertainment Corp. was another name that was coming in, though it was trending higher during the midweek session. The debt had improved after the parent company said it would contribute about $4 billion to its operating company’s restructuring.

Halcon plans prepack

Halcon Resources announced late Wednesday that it had inked a deal with creditors for a prepackaged bankruptcy plan.

Come Thursday, bonds were popping.

“Halcon was up a bunch,” a trader said. He saw the 8 5/8% notes due 2020 traded up to a 93 to 94 context, which was “up 10 points.”

He also saw the 13% notes due 2022 moving up to the mid-50s.

Another trader said the 13% notes closed at 54. He noted that the paper doesn’t trade often and that the bonds were around 30 at the end of March.

The second trader said the 9¾% notes due 2020, however, drifted off 5 points to 19½.

Under the prepacked plan, Halcon will eliminate $1.8 billion of its debt. The plan will cut about $222 million of preferred equity and reduce annual interest payments by over $200 million.

Debtholders will receive most of the equity in the company post-reorganization. Existing shareholders will get 4% of the new equity, while preferred stockholders will receive $11.1 million in cash.

Valeant pares gains

Valeant Pharmaceuticals lost the ground it had gained Wednesday after it was reported that asset sales were being considered.

The 5 7/8% notes due 2023 were “pretty active,” a trader said, falling over half a point to 82 7/8. The 4 3/8% notes due 2022 declined over a point to 87¼, as the 5 5/8% notes due 2042 slipped half a point to 76.

The 5 3/8% notes due 2020 were also down, losing over a point to 86½.

But both the 7% notes due 2020 and the 6 1/8% notes due 2025 were steady, at 88½ and 82¾, respectively.

On Wednesday, it was reported that the Canadian pharmaceuticals company is looking into the possibility of selling off its dermatology business, as well as its Provenge drug, a treatment for advanced prostate cancer.

Other sales of pharmaceutical assets – most of which have been acquired by the company in the last year or two – are also on the table, according to reports.

The potential sales are projected to bring in about $1 billion, which the company would use to cut its over $30 billion in debt.

Caesars comes in

Bonds linked to Caesars Entertainment’s bankrupt operating company were weaker Thursday, just one day after the bonds had improved.

The midweek gains were due to the parent organization saying that it would contribute about $4 billion to the operating unit.

But the pressure in Thursday’s market bled into the Las Vegas-based casino operator’s bonds.

At one desk, the opco’s 10% notes due 2018 were seen dropping 1½ points to 41 bid.

But another trader said the issue was unchanged at 47½.

© 2015 Prospect News.
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