Hercules Offshore bonds rise on restructuring news; Peabody continues to gain, Alpha retreats

By Stephanie N. Rotondo

Phoenix, June 18 – The distressed debt market ended firmer again on Thursday and Hercules Offshore Inc. was following that trend.

The gains in the name came as the market digested news of a restructuring agreement announced late Wednesday.

A trader said the 8¾% notes due 2021 closed up 5 points at 35¼, while the 10¼% notes due 2019 rose almost 3 points to 34¾.

Both the 7½% notes due 2021 and the 6 7/8% notes due 2022 were “up a couple” at 34 and 34½, respectively.

Another trader said the bonds traded busily in a 34 to 35 context.

In a news release published after the market closed Wednesday, the Houston-based offshore drilling services provider said it had reached a deal with a group of its senior noteholders that would convert about $1.2 billion of debt into 96.9% of new common stock in the reorganized company.

Said creditors also agreed to backstop $450 million of new debt.

The restructuring agreement will be implemented via a pre-packaged bankruptcy, which should come within the next few weeks.

Hercules also said that it had sufficient liquidity to continue conducting business as usual.

On the news, Standard & Poor’s downgraded the company’s credit rating to CC from CCC+ and took similar action on the senior notes.

Elsewhere in the oil and gas arena, bonds were weaker despite a gain in oil prices.

West Texas Intermediate crude improved 61 cents, or 1.02%, to $60.53, as the dollar weakened.

One trader said SandRidge Energy Inc.’s 7½% notes due 2021 were active and down a deuce at 49 1/8.

Energy XXI Ltd.’s 7½% notes due 2021 meantime fell a point to 36. Halcon Resources Corp.’s 9¾% notes due 2020 were down a like amount at 71¼.

Peabody up, Alpha down

Peabody Energy Corp. continued to be busy and better, as they have been for most of the week.

A trader said the 6% notes due 2018 were over half a point higher at 53, while the 10% notes due 2022 inched up half a point to 67¼.

The trader also saw the 6¼% notes due 2021 rising a point to 40 7/8.

Another market source pegged the 6½% notes due 2020 at 42 bid, up a point.

However, sector peer Alpha Natural Resources Inc. was not as lucky.

A trader said the 6¼% notes due 2021 fell half a point to 9½. The 6% notes due 2019 were down similarly at 10.

As for the 9¾% notes due 2018, those closed at 11¼, down 4 points in the last week.

Paul Deckelman contributed to this article

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