Peabody’s planned new issue said to prompt concerns; Energy XXI weakens after second-lien call

By Stephanie N. Rotondo

Phoenix, March 4 – The distressed debt market continued to focus on the energy space, as several names are looking to shore up its resources by issuing new debt.

On Monday, Peabody Energy Corp. launched a roadshow for a $1 billion offering, the proceeds of which are slated to fund a tender offer. But come Wednesday, traders were seeing signs that the new deal might already be in trouble.

Also on Wednesday, Energy XXI Ltd. held a conference call to discuss a proposed $1.25 billion offering of second-lien notes.

Though both of these issuers are planning to reduce their debt in one way or another via proceeds from the debt offerings, investors appear to be waiting to go skipping along to the bank and all of said issuers debt was seen drifting lower in midweek trading.

Elsewhere in the distressed space, a trader said Getty Images Inc.’s 7% notes due 2020 “continue to be weaker,” pegging the paper at 58½.

He deemed the level down 3 points from previous trades, though he said there was no fresh news to spark the decline.

Peabody deal raising concerns

A trader said Peabody Energy’s planned $1 billion offering of second-lien notes due 2022 might be hitting snags.

“There are some concerns about how that second-lien deal is going,” he said.

As such, the company’s debt was being pushed lower.

The 6% notes due 2018 fell to an 87 to 88 context from 90-91 previously, he said.

“The longer-dated paper was down a few more points as well,” he said.

Another trader deemed the 2018 maturity down a deuce at 87¾. He also saw the 6¼% notes due 2021 falling over 3 points to 73¾, as the 6½% notes due 2020 declined almost 2 points to 78½.

In the 7 3/8% notes due 2018 – the subject of a tender offer, which will be funded via proceeds from the second-lien offering – they were called down over a point at 108.

“I guess that new deal is weighing on the bonds,” the trader said.

Holders of said notes will receive $1,072.71 per each $1,000 of notes tendered. There is also a $30 early tender premium.

Pricing on the second-lien deal is expected this week.

Energy XXI holds call

Energy XXI, following the trend of new deals in the energy space, held a conference call Wednesday to discuss a proposed private placement offering of $1.25 billion senior secured second-lien notes due 2020.

The company first announced the issue on Tuesday, prompting Standard & Poor’s to drop the company’s ratings.

Moody’s Investors Service followed suit on Wednesday, with both citing concerns not only about the currently weak state of commodity prices, but also the company’s already-high leverage.

Investors seemed to agree with the agencies’ take and the company’s existing debt has suffered as a result.

One trader pegged the 8¼% notes due 2018 at 72, a loss of over 2 points on the day.

However, he said the 9¼% notes due 2017 were unchanged at 72.

Another trader said the 8¼% notes were “pretty active,” deeming the issue down 2 to 3 points at 71 bid, 72 offered.

He said the 9¼% notes were “trading similarly.”

In the 6 7/8% notes due 2024, the second trader said those fell to the high-40s from the mid-50s – “which makes sense, as they are layering a bunch of second-lien debt ahead of them now.”

The Houston-based oil and gas company plans to use proceeds to repay revolver borrowings.

© 2015 Prospect News.
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