Forest Oil cut down after merger terms change; Linn Energy wraps asset sale, bonds weaken

By Stephanie N. Rotondo

Phoenix, Dec. 16 – Forest Oil Corp. was the nom du jour in the distressed bond market Tuesday as the company announced revised terms of its merger with Sabine Oil & Gas LLC.

The terms were not ideal for bondholders, however, and they reacted by pushing the company’s debt down as much as 40 points.

Meanwhile, Linn Energy LLC’s debt was also weak, even after the company said late Monday that it had closed on an asset sale that brought in $1.95 billion.

But the recent rout in oil prices has hurt Linn particularly badly, given that its recent spending spree helped it rack up more debt than any other U.S. oil producer of its size.

Funds from the latest asset sale will be used to reduce debt in order to put investors at ease.

Late in the day, American Apparel Inc. announced that it had finally ousted founder Dov Charney as chief executive officer.

Charney was suspended in July amid allegations of “willful misconduct.” Charney tried to take control back from the board of directors by partnering with Standard General LP.

But Standard General was unable to find a balance with Charney and reportedly supported the board’s decision to fire him.

The board had conducted an investigation before coming to the decision, forming a “suitability committee” to look into the matter.

The bonds had not yet reacted to the news as of late Tuesday.

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