Peabody, Energy XXI debt rises ahead of deals; Magnetation hires advisors; Hercules downgraded

By Stephanie N. Rotondo

Phoenix, March 5 – Distressed debt investors were keeping an eye on energy names yet again in Thursday trading.

However, as a snowstorm hit New York and most of the Northeast, a trader said that afternoon trading was “muted.”

“It’s pretty snowy here,” he said.

But in the day’s dealings, both Peabody Energy Corp. and Energy XXI Ltd. were prepping new deals and, as a result, their older bonds were getting a boost.

Away from the energy arena, a trader said Magnetation LLC’s 11% notes due 2018 was an “interesting” addition to the distressed radar screens.

Over the last week, he said, the bonds have lost at least 7 points. During Thursday’s session, the paper traded around 63 early on, but then fell to 59. It eventually settled in a 60 to 61 context, the trader said.

The iron ore concentrate producer said Thursday that it had hired The Blackstone Group as a financial advisor to evaluate alternative to improve liquidity.

Elsewhere, RadioShack Corp.’s credit default swaps were settled at 11½ at an auction during the session.

A trader said the company’s 6¾% notes due 2019 traded down half a point to 11½.

Peabody gains

Peabody Energy’s planned offering of $1 billion senior secured second-lien due 2022 – which was being talked at a 10% coupon – was said to be “doing a little better,” a trader said ahead of pricing on Thursday.

As such, the company’s existing debt was getting a little boost.

The trader said the 7 3/8% notes due 2016 – which will be taken out with proceeds from the new deal – rose 2 points to 109¾. The 6½% notes due 2020 were up similarly, trading at 80¼.

The trader also saw the 6% notes due 2018 gaining over a point to 88½, though the 6¼% notes due 2021 fell a quarter-point to 76.

Another market source pegged the 6½% notes at 80 bid, up a deuce.

Peabody is a St. Louis-based coal producer.

Energy XXI rises

Energy XXI’s new issue also appeared to be doing well, as the deal was upsized to $1.45 billion from $1.25 billion.

Price talk on that piece of paper was 11%.

As with Peabody, Energy XXI’s debt was lifted ahead of pricing on the new issue.

A trader saw the 8¼% notes due 2018 putting on nearly 2 points, ending around 72¾. The 7½% notes due 2021 linked to Energy XXI Gulf Coast Inc., however, drifted down over half a point to 49 3/8, he said.

In addition to increasing the size of the deal, call protection on the new issue was increased to 2.5 years from two years.

The Houston-based oil and gas company is using proceeds to pay down its revolving credit facility.

Hercules downgraded

Hercules Offshore Inc. was being quoted weaker on Thursday, as Moody’s Investors Service downgraded the company to Caa2 from B2.

A trader said the 7½% notes due 2021 were offered at 29½, while the 8¾% notes due the same year were offered at 30.

The 10¼% notes due 2019 were pegged at 31½ bid, 33½ offered.

Moody’s attributed its rating change in part to concerns about the company’s declining earnings power, especially after it recently lost one of its drilling contracts with Saudi Aramco. The agency added that the company’s liquidity may not be able to withstand the current market rates for oil and that it might have to consider a distressed debt exchange in order to deal with its debt burden.

Such a move would be considered a default by the Houston-based offshore drilling company.

© 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.