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Linn Energy enters joint venture with Quantum, bonds up; Cliffs gains as new deal shopped
By Stephanie N. Rotondo
Phoenix, March 24 – A distressed debt trader noted Tuesday that while oil prices were “virtually unchanged,” the energy space was trending higher.
In particular, Linn Energy LLC paper rose after the company announced a joint venture with private equity firm Quantum Energy Partners.
Under the terms of the deal, Quantum will invest $1 billion in a new company that will acquire and develop oil and gas assets. Linn Energy will manage the company and will take a 15% to 50% direct working interest in the acquired assets.
With its debt-raising ability, the new entity could potentially fund over $2.5 billion in acquisitions and asset development. If the company looks to shed any assets, Linn Energy will get first dibs.
For its part, West Texas Intermediate crude slipped 6 cents to $47.39 a barrel. Brent crude declined 82 cents, or 1.47%, to $55.10.
Meanwhile, Cliffs Natural Resources Inc.’s bonds were mostly higher as the company began shopping around a $500 million first-lien senior secured offering with a 9% yield.
The new deal was slated to come at the discounted price of 93 and call protection was increased to three years from two years.
“They need to get that deal done to do that exchange,” a trader said, referring to the iron ore producer’s previously announced tender offer, which expires Wednesday evening. But “that pricing” on the first-lien issue could pressure the second-lien notes, he said.
Elsewhere in the iron arena, a trader said Magnetation LLC’s 11% notes due 2018 fell 4 points into the mid-40s from the high-40s.
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