BPZ Resources pulls offering; Chesapeake rises on asset sale; funds see $549 million outflow

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Oct. 16 – The primary high-yield bond market passed the Thursday session becalmed amid the volatility in the global capital markets.

No deals priced. No deals were announced. And the only news on the new issue front was negative: BPZ Resources, Inc. pulled its $150 million offering of senior secured notes due 2019 from the market.

Meanwhile, the secondary high-yield bond market ended on a high note Thursday after getting beaten down all week.

“Some things definitely bounced off the lows,” a trader said.

“There were offer-wanteds the whole day long,” another trader said.

Chesapeake Energy Corp. was boosted on news the company is selling some oil and gas assets. The sale is valued at $5.4 billion and is expected to close by the end of the year.

There was also a “wild swing” in the energy exploration and production sector, “which had been particularly downtrodden,” according to a trader. Most bonds in that space, as well as in the coal space, were improved on the day.

Cash flows to the dedicated high-yield funds turned negative for the most recent reporting week, with the funds seeing $549 million of outflows, according to a trader who cited information reported by Lipper-AMG.

The outflow trails the previous week's $1.28 billion inflow, market sources say.

BPZ pulls deal

BPZ Resources cited market conditions as it pulled its $150 million of notes due 2019 from the market.

"The current market conditions have led us to conclude that our offering of the senior secured notes is not in the best interests of the company at this time,” president and chief executive officer Manolo Zuniga remarked in a Thursday press release announcing the withdrawal of the deal.

Seaport Global was the bookrunner.

The Houston-based company had planned to use the proceeds to repay its 6½% convertible senior notes due March 1, 2015 and for general corporate purposes, including planned capital expenditures for field development and drilling in 2014 and 2015 and infrastructure.

Market regains footing

After taking a brutal beating for the week, market indicators turned positive on Thursday.

The KDP High Yield index came off its 52-week low, ending at 71.04 with a 5.91% yield. On Wednesday, the index had hit its low point of 70.93 with a 5.95% yield.

The CDX Series 23 High Yield index was meantime up half a point at 104 29/32 bid, 105 3/32 offered, according to a market source.

According to another trader, the index closed at 104 7/8 bid Thursday after closing Wednesday around 104 bid.

Dynegy Inc.’s $5.1 billion three-tranche deal from Friday was rebounding with the market.

The $2.1 billion of 6¾% notes due 2019 were almost 1½ points better at par ½, a trader said. The $1.25 billion of 7 5/8% notes due 2024 rose nearly a point to 101 1/8.

As for Burger King Worldwide’s 6% notes due 2022 – a $2.25 billion issue that priced Sept. 24 – they continued to tread water, finishing with a 99 handle yet again.

Chesapeake up on asset sale

Chesapeake Energy’s bonds were “way up” in early trading, a trader said, as the company disclosed an asset sale.

However, the bonds then came in a little, although they ended the session up on the day.

The trader saw the 4 7/8% notes due 2022 rising 4½ points to 101 5/8, the 5 3/8% notes due 2021 up 3½ points at 103¼ and the 5¾% notes due 2023 at 107 5/8, up more than 4½ points. The 6 5/8% notes due 2020 increased 4 points to 111.

Another market source pegged the 6 5/8% notes at 111 bid, also up 4 points.

A third source placed the 5¾% notes at 107¾, a 5-point gain on the day.

The Oklahoma City-based oil and natural gas company is selling some of its shale oil and natural gas assets to Southwestern Energy Co. for $5.4 billion. The sale includes 413,000 acres and 1,500 wells and drilling rights in the southern Marcellus Shale and eastern Utica Shale in Pennsylvania and West Virginia.

The company said the sale would have no impact on its 2015 production guidance.

The transaction is expected to close by the end of the year, though it is not clear what the proceeds will be used for.

On the news, both Standard & Poor’s and Moody’s Investors Service lifted their views on the company to positive from stable.

Ratings from both agencies were affirmed.

E&P names improve

Chesapeake wasn’t the only energy name heading into higher territory on Thursday.

“There was a wild swing in the E&P sector,” a trader said.

Quicksilver Resources Inc.’s 7 1/8% notes due 2016 “traded actively,” the trader said. Another trader pegged the issue at 21, unchanged.

The first trader also placed the 9 1/8% notes due 2019 at 52¼, up 6½ points.

However, the 11% notes due 2021 were deemed half a point lower at 54½.

Samson Investments Co.’s 9¾% notes due 2020 were meantime up more than 2 points at 78½.

At another desk, SandRidge Energy Inc.’s 7½% notes due 2021 were called 1½ points better at 89 bid, while Linn Energy LLC’s 7¾% notes due 2021 improved almost a point to 96 bid.

Coal sector rallies

The coal space “had a real good rebound to it too,” according to a trader.

He said Walter Energy Inc.’s 8½% notes due 2021 jumped 3 points to 30.

In Arch Coal Inc.’s debt, the 7¼% notes due 2021 gained “almost 4 [points],” he said, seeing the issue close at 39½. The 9 7/8% notes due 2019 gained almost 5 points to 45, and the 7¼% notes due 2020 improved 5 points to 47.

The trader also saw Alpha Natural Resources Inc.’s 6¼% notes due 2021 rising 4¾ points to 47.

At another desk, the Alpha Natural paper was deemed up 5½ points at 48 bid.

A third market source said Arch Coal’s 8% notes due 2019 moved up to 69 from a low of 64. The 2021 paper neared 40, up from 34.

iHeart rises

The firmer tone of the market was also helping iHeart Communications Inc.

One trader said the 10% notes due 2018 pushed up 1½ points to 78¾, while the 14% notes due 2021 inched up half a point to 85.

A second trader said the 10% notes traded “as high as 79, up from at least 76.” The 14% notes closed around 85, up from 83, he said.

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