Oil and gas bonds mixed with oil prices ahead of new data; Caesars mostly weaker after lawsuit

By Stephanie N. Rotondo

Phoenix, June 16 – The distressed debt market continued to keep an eye toward the oil and gas arena ahead of the release of new weekly inventory data.

Overall, distressed oil and gas bonds were mixed in Tuesday trading, following a trend set by oil prices.

West Texas Intermediate crude rose 46 cents to $59.98 per barrel, while Brent crude drifted down 20 cents to $63.75.

The movement of oil prices comes ahead of the Energy Information Administration’s weekly inventory report on Wednesday. The American Petroleum Institute will follow that with its own inventory data release on Thursday.

Analysts are predicting that stockpiles declined again as demand increased.

Additionally, the market is likewise keeping an eye on tropical storms developing in the Gulf Coast, as that could have an impact on production.

Of the day’s downers, EXCO Resources Inc.’s 7½% notes due 2018 declined almost half a point to 67¼, according to a trader. Alta Mesa Holdings LP’s 9 5/8% notes due 2019 were also softer, closing nearly a point weaker at 80¾.

Sabine Oil & Gas Corp.’s 7¼% notes due 2019 were also ending softer, dropping half a point to 20¾.

A trader said the issue appeared to be trading with accrued interest, despite the company skipping a $21 million coupon payment on Monday.

Rounding out the day’s losers, SandRidge Energy Inc.’s 7½% notes due 2021 finished at 51½ bid, down almost a point, according to a market source.

Among the day’s winners, Energy XXI Ltd.’s 7½% notes due 2021 ended up a quarter-point at 37, a trader said. He also saw Ocean Rig UDW Inc.’s 7¼% notes due 2019 rising over a point to 79½.

Elsewhere in commodity land, coal names were also finishing the day in mixed fashion.

A trader said Arch Coal Inc.’s 7% notes due 2019 were steady at 16. He said Alpha Natural Resources Inc.’s 6¼% notes due 2021 were likewise unchanged at 11.

At another desk, the Alpha Natural notes were deemed a point weaker at 10¼ bid, while Peabody Energy Corp.’s 6½% notes due 2020 improved a point to 41 bid.

Caesars faces another battle

Bonds of Caesars Entertainment Corp. and its bankrupt unit, Caesars Entertainment Operating Co. Inc., were mostly weaker Tuesday, as a trustee for CEOC’s first-lien noteholders brought a $6 billion lawsuit against the parent company.

A trader saw the 9% notes due 2020 inching up to 81½. However, the 10% notes due 2018 and 10¾% notes due 2016 were down. The former slipped half a point to 25¾, he said, while the latter declined “almost 2 [points]” to 27.

The Las Vegas-based casino operator placed its operating unit into bankruptcy on Jan. 15. Since then, lawsuits have plagued the company, most of which allege the parent stripped the opco of assets and saddled it with monstrous debt.

The latest lawsuit – brought by the trustee of the first-lien notes, UMB Bank NA – is alleging that the parent company’s attempt to essentially release itself of any guarantee on the opco’s first-lien notes is a violation not only of the Trust Indenture Act of 1939, but also of the indenture itself.

The trustee is seeking monetary restitution equal to the accelerated principal amount of the notes – about $6.35 billion – as well as interest.

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