Talen Energy to be taken private, bonds fall; Chemours under pressure; oil and gas gains

By Stephanie N. Rotondo

Seattle, June 3 – Fresh news remained the main driver of names in the distressed debt market on Friday.

Take, for instance, Talen Energy Corp. Its bonds were weakening in the final trading session of the week after it was reported that Riverstone Holdings LLC plans to take the merchant power company private for $1.8 billion.

Chemours Co. also continued to be active – and lower – following Citron Research’s report out Thursday that deemed a bankruptcy on the horizon.

Meanwhile, oil and gas names were generally firm on the day, even as domestic crude prices drifted downward.

The weakness in the commodity came as Baker Hughes said the active U.S. drill rig count increased by nine last week, the first gain in 11 weeks.

Also weighing on oil prices was a weaker-than-expected jobs report.

A trader said Whiting Petroleum Corp.’s 5¾% notes due 2021 were steady at 85¼, though its 5% notes due 2019 inched up half a point to 90½.

Chesapeake Energy Corp. was meantime ticking upward, its 8% second-lien notes due 2022 adding half a point to end at 81 1/8 and its 6 5/8% notes due 2020 gaining almost a point to 68 1/8.

Also up were Southwestern Energy Co.’s 4.1% notes due 2022, which put on almost 3 points to finish at 86¼.

Talen bonds weaken

Talen Energy, an Allentown, Pa.-based merchant power company, is being taken private by Riverstone Holdings, it was reported on Friday.

“You don’t see that one often,” a trader said, adding that there were “tons of trades today.”

He saw the 6½% notes due 2025 slipping ¼ point to 87¼, as the 4 5/8% notes due 2019 dropped more than 2 points to 88¾.

Another trader said the 6½% notes were “pretty active.” He said the paper was “going out on the lows of the day with an 86-handle.”

He placed the 5½% notes due 2019 in an 88 to 89 context.

Talen was formed just last year when Riverstone merged its generation assets with PPL Corp.’s merchant generation unit. Since then, Riverstone has held a 35% stake in the company.

Under the terms of the deal, the private equity firm will pay $14.00 a share for the 65% of stock it doesn’t own. The agreement allows for a 40-day “go-shop” period in which Talen can seek other proposals.

Chemours trades off

Chemours’ debt remained under pressure Friday as investors continued to react negatively to a recent report from Andrew Left’s Citron Research.

A trader said the name was “down a couple more points,” pegging the 6 5/8% notes due 2023 at “84-ish” and the 7% notes due 2025 “around 83.”

In a report out Thursday, Citron – the same Citron that called out Valeant Pharmaceuticals International Inc. for its accounting practices – deemed Chemours “a bankruptcy waiting to happen,” given that the former parent saddled the company with its chemical-linked liabilities. Citron estimated that Chemours could be on the hook for up to $5 billion in liabilities tied to 3,500 lawsuits against PFOA, or C-8, a chemical used for Teflon products.

In an interview with Bloomberg, Left called the issue a “monster liability.”

“DuPont took all their environmental liabilities, spun it off into a company, dumped it onto America,” he said.

More moves in Fannie, Freddie

Fannie Mae and Freddie Mac once again dominated trading as the week came to a close.

The GSEs’ preferreds were also rising again, as the U.S. Judicial Panel on Multidistrict Litigation rejected the Federal Housing Finance Agency’s request to combine four separate lawsuits into one case based in Washington, D.C.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) gained a nickel, or 1.07%, to close at $4.72. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) added 8 cents, or 1.79%, to end at $4.60.

In its ruling issued Thursday, the panel said that the government failed to establish sufficient burden in dealing with each of the four cases on their own.

Had the panel ruled for the FHFA, the case would have likely gone to judge Royce Lamberth. Lamberth has previously ruled in favor of the government by dismissing one investor’s lawsuit.

That case, however, is being appealed, with a decision expected later this year. That ruling could be overturned following the release of unsealed documents in recent weeks by judge Margaret Sweeney of the Court of Federal Claims.

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