Distressed bonds firm as market begins winding down for holidays; Forest Oil actively traded

By Stephanie N. Rotondo

Phoenix, Dec. 23 – The distressed debt arena was firm going out Tuesday, but volume was sharply lower due to the coming Christmas holiday.

“There was some stuff moving around, but nothing too notable,” one trader noted, with one exception.

That exception was Forest Oil Corp., whose bonds have been declining since last week when the company said it had revised the terms of its merger with Sabine Oil & Gas LLC.

Under the revision, a change of control trigger was avoided. The terms had previously stated that the feature would be triggered and that would have required the company to redeem its debt at 101% of par.

“They’ve come down a bunch,” the trader said, seeing the $578 million issue of 7¼% notes due 2019 trading around 38.

He said the paper had been trading in the mid-40s last week after the news came out.

Leaving the debt outstanding will save the companies at least $100 million in transaction and interest expenses over the next three years, according to a company-issued statement out Dec. 16. It also meant that the entities could forgo an $850 million loan from Barclays plc and Wells Fargo & Co.

Forest Oil first announced its combination with Sabine in May. But since then, “market dynamics have changed considerably but the logic for combining these two complementary companies has not,” said David Sambrooks, the combined company’s chief executive officer, in the statement.

The bond market will close early on Wednesday for Christmas Eve. It will be closed entirely on Thursday, Christmas Day.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.