Distressed debt quiet; Hornbeck files, ‘no one surprised’; Oasis flat on ‘going concern’

By Abigail W. Adams

Portland, Me., May 19 – The distressed debt space was quiet on Tuesday as the new issue calendar overshadowed secondary market activity.

Crude oil futures continued to gain on Tuesday, lifting some distressed energy credits along with it.

In a follow through from the previous session, Denbury Resources Inc.’s senior notes continued to rise.

However, the fate of many names in the energy sector has already been sealed, a source said.

Hornbeck Offshore Services, Inc. filed for Chapter 11 bankruptcy protection in a pre-packaged plan negotiated with creditors.

The filing was unsurprising and did little to move its unsecured notes, a source said.

Oasis Petroleum Inc.’s senior notes were also unchanged after the hydrocarbon exploration company included a going-concern statement in its first-quarter earnings report.

Energy gains continue

Crude oil futures continued to gain on Tuesday, lifting some distressed energy credits.

Denbury Resources’ 9% senior secured second-lien notes due 2023 were up 3 points to a 30-handle, a source said.

About $6 million of those bonds were in play during an otherwise quiet Tuesday session.

They were trading on a 13-handle a month ago.

Denbury’s 9¼% senior secured second-lien notes due 2022 were not active on Tuesday after trading as high as 31 on Monday.

While the oil and natural gas company’s secured notes were improving, the unsecured notes remained in the single digits, sources said.

WTI crude oil futures for June delivery settled on Tuesday – the last day of the contract – at $32.50, an increase of 68 cents or 2.1%.

Hornbeck files

While rising crude oil futures lifted some names in the energy sector, the fate of many were already sealed, a source said.

Hornbeck Offshore Services filed for Chapter 11 bankruptcy protection on Tuesday in a pre-packaged filing.

However, the filing did not move the company’s senior notes.

The majority of trading activity was in its term loans.

Hornbeck has about $675 million outstanding in unsecured bonds – its 5 7/8% senior notes due April 1, 2020 and its 5% senior notes due 2021, a source said.

The filing was “not very shocking,” a source said.

The company was in default after failing to cover the 5 7/8% notes at their maturity.

The restructuring support agreement was entered into with 79% of the holders of the unsecured debt.

The notes were on a 2-handle in the run up to the filing and did not move after the news was announced.

Oasis ‘going concern’

Oasis Petroleum’s junk bonds were also unchanged following a first-quarter earnings miss and a going-concern statement in its quarterly report.

Oasis’ 6 7/8% senior notes due 2022 and 6 7/8% senior notes due 2023 continued to trade in the 10 to 12 context in light volume, a source said.

The exploration and production company reported EBITDA of $167 million in the first quarter versus analyst expectations for EBITDA of $172.15 million.

Oasis stated it would be unable to comply with its leverage ratio covenant under its revolving credit facility beginning in the fourth quarter, which, unless waived, would result in default.

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