Ultra Petroleum notes mixed on exchange agreements; Hexion issues mixed as holders prep for debt talks

By James McCandless

San Antonio, Oct. 17 – The distressed space concentrated on news-driven names in Wednesday activity.

Two series of Ultra Petroleum Corp.’s notes were mixed after the company announced exchange agreements for the notes.

Despite a dip in oil futures, bellwether tranches of EP Energy Corp., California Resources Corp., and Sanchez Energy Corp. improved.

Hornbeck Offshore Services, Inc. paper was also better elsewhere in the sector.

In the chemical space, Hexion Inc.’s notes were mixed as second lien holders prepare for debt talks with the company.

Elsewhere, Intelsat SA’s notes were firmer in the telecom space while Frontier Communications Corp.’s issues declined.

Though retail names were not the focus of the day, L Brands, Inc. and J.C. Penney Co., Inc. paper received negative attention.

Ultra Petroleum mixed

Ultra Petroleum’s notes were mixed at the top of Wednesday activity, traders said.

The 6 7/8% notes due 2022 jumped up 7½ points to close at 61 bid. The 7 1/8% notes due 2025 lost 2½ points to close at 44½ bid.

The Houston-based independent oil and gas producer announced early Wednesday that it entered into exchange agreements for $556.4 million principal amount, or 79.5%, of the 6 7/8% senior notes due 2022 and about $267.1 million principal amount, or 53.4%, of the 7 1/8% senior notes due 2025 issued by Ultra Resources, Inc., a wholly owned subsidiary, Prospect News reported.

In exchange for the two series, the company agreed to issue new 9% cash/2% pay-in-kind senior secured second-lien notes due July 2024 and new warrants.

“The new issue’s wedged in between the current structure,” a trader said. “The 2025’s got put behind the new ones. So those moved lower because they got subordinated.”

The new issue is set to trade in the high 80’s to low 90’s, according to a market source.

Meanwhile, despite a decline in oil futures, bellwether oil tranches saw a boost.

EP Energy, another Houston-based producer, saw its 6 3/8% notes due 2023 rise about 2 points to close at around 69 bid.

Another Houston-based peer, Sanchez Energy’s 6 1/8% paper due 2023 added about ¾ point to close at around 53¾ bid.

Los Angeles-based producer California Resources’ 6% notes due 2024 gained about ½ point to close at 86½ bid. The 8% notes due 2024 held level at about 98 bid.

Dipping below 70 for the first time in a month, West Texas Intermediate crude oil futures ended Wednesday lower by $2.17 to $69.75 per barrel. North Sea Brent crude oil fell $1.31 to $80.10 per barrel.

U.S. crude oil stockpiles were reported to have increased by 6.5 million barrels, far surpassing analyst estimates.

In the energy shipping space, Covington, La.-based Hornbeck Offshore’s 5% notes due 2021 picked up about ¼ point to close at 75½ bid.

Hexion to start debt talks

Hexion issues were also mixed, market sources said.

The 6 5/8% notes due 2020, while rising as high as 91 in intraday trading, settled back down at 89 bid. The 9% notes due 2020 fell about 2¾ points to close at around 69½ bid.

“That was the other topical name of the day,” a trader said.

The notes have been under pressure since the beginning of the month as more attention is paid to Hexion’s debt structure and its struggles to operate as a supplier under current trade conditions. The 9% notes were trading at around 84 bid at the beginning of October, according to Trace data.

News broke Wednesday that the holders of the Columbus, Ohio-based chemical producer’s 9% second-lien notes have hired law firm Milbank, Tweed, Hadley & McCloy in preparation for negotiations over the $2.4 billion in debt that is coming due in 2020.

“They’re getting ready to extract as much value as they can,” the trader said.

Telecom also mixed

Elsewhere, in the telecom space, Intelsat’s paper moved higher, traders said.

The Intelsat (Luxembourg) SA 8 1/8% paper due 2023 added about ¾ point to close at 91¼ bid. The Intelsat Jackson SA 5½% paper due 2023, while trading lower throughout Wednesday, closed level at about 93 bid.

On Tuesday, the 8 1/8% paper rose about 1½ points and the 5½% paper gained about 1 point.

The Luxembourg-based satellite communications name saw a jump on Tuesday after announcing two new business segments this week.

On Monday, the company announced a new service that would enhance satellite coverage to high-traffic business jet routes in an effort to plug gaps in broadband coverage.

The company also announced that it would be working to expand cellular network coverage in sub-Saharan Africa with an investment in Africa Mobile Networks.

On the domestic side, Norwalk, Conn-based wireline telecom name Frontier notes declined about ½ point across the structure.

The 7 5/8% notes due 2024 lost about ½ point to close at around 63 bid. The 10½% notes due 2022 also fell about ½ point to close at 88 bid. The 11% notes due 2025 dropped about ½ point to close at around 76½ bid.

Retail weaker

While not the main focus of the session, retail names continued to receive negative attention, market sources said.

Columbus, Ohio-based retailer L Brands’ 5¼% notes due 2028 shaved off about 1 point to close at around 84¾ bid.

Elsewhere, Plano, Texas-based department store chain J.C. Penney saw its 8 5/8% paper due 2025 lost 1½ points to close at 64½ bid.

“Sears spread its weakness to the rest of the sector,” a trader said. “Names that some people were on the fence about a month ago have some pretty big targets on their backs.”

© 2015 Prospect News.
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