Belden & Blake bonds rocked as heads roll; primary seen quiet

By Paul Deckelman and Paul A. Harris

New York, Dec. 22 - Belden & Blake Corp. bonds were being quoted down four to five points on Wednesday following an abrupt management shakeup at the North Canton, Ohio-based independent oil and gas exploration and production company and a disclosure of likely declines in its proven energy reserves.

Primaryside activity was meanwhile extremely quiet on the last full pre-holiday trading session (The Bond Market Association has recommended a 2 p.m. ET close Thursday and a full market close Friday in observance of the Christmas holiday), with the Cajun Funding Corp. seven-year deal - expected to be the last forward calendar deal of 2004 - seen as a no-show, pricing-wise.

Belden & Blake's 8¾% notes due 2012 were seen down more than four points to around the 105 bid level at several desks after the company said in an 8-K filing with the Securities and Exchange Commission that both its president and chief executive officer, Frost W. Cochran, and its chairman, David M. Carmichael, had tendered their resignations last week, and those resignations were accepted by Belden & Blake's sole stockholder, Capital C Energy Operations LP.

At another shop, a trader characterized the bonds as being "under pressure." He pegged them lower than the others, at around 102.5 bid, 103.5 offered, which he said was down about four points.

And another source saw the bonds all the way down around 101 - a loss of nearly seven points on the session.

Two other Belden & Blake executives besides Cochran and Carmichael - senior vice presidents B. Dee Davis Jr. and W. Mac Jensen - also resigned their executive positions. Cochran and Carmichael also relinquished their seats on the company's board of directors; Capital C reduced the size of the board to six members from eight previously.

The board, controlled by Capital C, appointed James A. Winne III to serve as the new CEO and chairman, and Michael Becci to serve as the new president and chief operating officer. Both have up till now been affiliated with Houston-based Legend Natural Gas, LP, a privately held oil and gas company - Winne as president and CEO, and Becci as vice president and chief financial officer. Legend, like Capital C, is an affiliate of Carlyle/Riverstone Global Energy and Power Fund II, LP.

Belden & Blake also disclosed in the SEC filing that the company - which is in the process of putting together its estimate of proved oil and gas reserves - believes that as of the end of this year its proved reserves are likely to be less than the estimate as of Dec. 31, 2003 that was included in its 2003 form 10-K. It said that its expects total proved reserves to show a decrease of about 18 billion cubic feet equivalent (Bcfe), explaining that most of its 2004 drilling focused on proved undeveloped locations, which converted proved undeveloped reserves into proved developed reserves but which did not add any new proved reserves.

It further said that, based on its preliminary reserve evaluation, its estimate of proved reserves as of Dec. 31 could reflect a further decrease of as much as 25 to 50 Bcfe from the 2003 year-end figures, due to factors that include recent production and drilling results; a reevaluation of the company's inventory of proved undeveloped well sites; and reevaluation of its estimated future development, completion and operating costs.

Tenet drops back

Elsewhere, Tenet Healthcare Corp. - whose bonds had firmed in Tuesday's dealings on news that the Santa Barbara, Calif.-based hospital operator had agreed to settle some 750 lawsuits alleging that patients had been subjected to unnecessary surgeries at a hospital it formerly owned, for $395 million - gave it all back on Wednesday.

"With the news yesterday [Tuesday] and today [Wednesday], it looks like the bonds rallied yesterday as they get all of this out of the way," a trader said, quoting the company's 6½% notes due 2012 as having finished Tuesday as high as 94.5 bid, 95.5 offered, up about a point or so, "only to be 92.75 bid, 93.75 offered today, back to where they started prior to that run."

He saw the company's 2011 bonds having fallen back similarly to about 93 bid, 94 offered, while its shorter paper "really doesn't move a hell of a lot," with the 2006 paper at 101 bid, 102 offered and the 5% notes due 2007 at 98.25 bid, 99.25 offered.

The suits involved allegations that patients had been subjected to unnecessary surgeries at the former Tenet hospital in Redding, Calif., which Tenet has since disposed of as part of a broader effort to get out from 27 non-core or underperforming facilities as it tries to cut costs and refocus its operations on more profitable areas.

Another trader characterized Tenet as a "good news, bad news" situation.

"The good news is that they're settling," he opined. "But they've got, like, $1.2 billion in cash on the books and if they only settled one [matter] for close to $400 million, do they chew through the rest of their money [that quickly]? They haven't even settled with the government," which has alleged numerous problems at several Tenet hospitals.

"The news was at first received OK [by investors], because this is progress - but at the end of the day, the business still stinks and it's not going anywhere, and they have this looming billion-dollar settlement with the government, which puts them at sort of zero cash.

"So they're going to have to renegotiate their bank facility because they're in violation" because of the Redding settlement.

He saw the bonds as softer, with the 6 3/8% notes due 2011 trading into a 94 bid and closing the day at 93 bid, 94 offered.

"I don't look at this as good news," he continued. "It's kind of more of the same - disappointing news out of Tenet, which you're going to see. This [credit] is still subject to headlines. And as much as they talk about a turnaround - there hasn't been one yet."

AmerisourceBergen steady

Elsewhere in the healthcare sector, the first trader said, AmerisourceBergen Corp.'s bonds seemed little changed on the news that the Valley Forge, Pa.-based medical products distributor issued lower guidance.

Its 8 1/8% notes due 2008 and 7¼% notes due 2012 were trading "pretty much on top of each other," at 111.5 bid, 112.5 offered, he said. "After the news this [Wednesday] morning, they were really unchanged, so it seems like bad news doesn't rattle this market a whole hell of a lot."

The second trader, meantime, said that "those bonds trade so infrequently anymore that it it's really hard to get a handle on them. My sense is that if they were off at all, there would be buyers. But we didn't see anything - you just don't see that one."

AmerisourceBergen said it reduced its fiscal year 2005 estimate for earnings per share from continuing operations to $4 to $4.10 from $4.20 to $4.30, citing lower than anticipated pharmaceutical price increases, fewer product deals from manufacturers and reduced alternate source purchases in the December quarter.

The company said it expects earnings per share from continuing operations in the December quarter to be between 60 cents and 65 cents.

It further said that it "continues to expect operating revenue growth in fiscal year 2005 to be flat, reflecting the loss of two large customers in fiscal 2004.

"Our current estimates for diluted earnings per share from continuing operations indicate we will not meet our expectations for the December quarter primarily due to buy-side shortfalls," the company statement said.

Primary quiet

The ranks of the high-yield primary market were considerably thinned Wednesday, as Prospect News made its rounds.

No issues priced and no developments were heard on deals pending.

Although sources believe that one issue remains in the market, Church's Chicken (Cajun Funding Corp.)'s $155 million of seven-year non-call-four senior secured second lien notes, market sources said Wednesday that it is extremely unlikely that terms will emerge before the end of the year.

"We are done for the year," read an email message from one sell-side source - one of the few that could be reached on Wednesday - late in the session.

However, sources throughout the market, both in the United States and in Europe, advise that January is likely to pick up at a brisk pace, although perhaps not as brisk as that seen through the Dec. 6 week, which saw $5.16 billion in 23 tranches, and the Dec. 13 week, $6.75 billion in 27 tranches.

"It won't be as busy as we saw at the end of 2004, with all of the opportunistic financing that took place before and after Thanksgiving," said one investment banker.

"But it will be a solid market in January."

© 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.