Sabine bonds retreat further after downgrade; MolyCorp dives; NII cancels unit auction

By Stephanie N. Rotondo

Phoenix, March 17 – Distressed bonds were coming in Tuesday following the equity markets and oil prices.

The pressure on the markets was attributed at least in part to the coming statement from the Federal Reserve following the conclusion of its two-day policy meeting on Wednesday. Investors will once again be looking for clues as to when the central bank plans to raise interest rates.

As for the day’s dealings, Sabine Oil & Gas Corp.’s debt continued to weaken following a downgrade from Standard & Poor’s.

On Monday, the company’s debt had taken a hit after it was announced that a 10-K filing was being delayed and that the company had retained Lazard Ltd. and Kirkland & Ellis to review its strategic options.

A market source saw the 7¼% notes due 2019 closing around 15, up from opening levels of 14 but still down from Monday’s closing levels of 16.

S&P dropped its rating on Sabine to CCC from B-, according to a press release published Tuesday. The senior unsecured notes were cut to CC from CCC.

The ratings agency said the changes reflected the belief that the company could face a restructuring in the next year.

The company’s current struggle comes after a merger with Forest Oil Corp. in May 2014 that was expected to increase financial flexibility. But as commodity prices pulled back precipitously, all gains expected from that combination vanished.

The merger wrapped in December.

Sabine said that it expects to file its latest financial results by March 31. However, it does not intend to hold a quarterly conference call.

Elsewhere in the oil and gas arena, bonds remained soft amid another decline in oil prices.

West Texas Intermediate crude fell 75 cents, or 1.71%, to $43.13 per barrel, while Brent crude lost $1.23, or 2.25%, to end at $53.44.

At one desk, SandRidge Energy Inc.’s 7½% notes due 2021 were seen almost a point lower at 59 bid. Linn Energy LLC’s 7¾% notes due 2021 were meantime pegged at 75¼, off half a point.

MolyCorp’s future in question

MolyCorp Inc.’s 6% notes due 2017 lost nearly half of their value Tuesday after an independent auditor cited concerns about the company’s ability to continue.

The notes were quoted at 8¼ bid, 8½ offered.

On Monday, the rare earth minerals mining company posted a fourth-quarter loss of $329.8 million – its 12th consecutive quarterly loss.

Revenue was $116.2 million.

Analysts polled by Thomson Reuters had forecast revenue of $104 million.

Cash flows were negative $75.8 million.

Gyrations in pricing and an increased level of cash burn have been blamed for the company’s troubles. Additionally, the company has about $1.7 billion of debt, including $206 million of convertible notes that come due in 2016.

As of Dec. 31, MolyCorp had $211.7 million of cash and equivalents.

NII nixes auction

NII Holdings Inc. cancelled an auction for its Mexican unit Tuesday after it received no competing bids to AT&T Inc.’s $1.88 billion proposal.

The sale price is a 25% premium to the value indicated in NII’s reorganization plan.

However, the Reston, Va.-based company’s 7 5/8% notes due 2021 ended weaker, closing at 30¼ bid, 30½ offered.

That compared to previous levels around 32.

On Friday, holders of the 2021 paper asked the bankruptcy court overseeing the company’s case to order the company to enter mediation with the informal noteholder group.

The group is alleging that NII has rebuffed its attempts to be involved in reorganization talks. As such, they claim that other creditors, which are being included, are being treated more favorably, though the indenture governing the 2021 notes places them at a rank equal to the others.

© 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.