Linn Energy enters joint venture with Quantum, bonds rise; Cliffs debt gains, new deal shopped

By Stephanie N. Rotondo

Phoenix, March 24 – A distressed debt trader noted Tuesday that while oil prices were “virtually unchanged,” the energy space was trending higher.

In particular, Linn Energy LLC paper rose after the company announced a joint venture with private equity firm Quantum Energy Partners.

For its part, West Texas Intermediate crude slipped 6 cents to $47.39 a barrel. Brent crude declined 82 cents, or 1.47%, to $55.10.

Meanwhile, Cliffs Natural Resources Inc.’s bonds were mostly higher as the company began shopping around a $500 million first-lien senior secured offering with a 9% yield.

Linn up on joint venture

Linn Energy has entered into a joint venture with Quantum Energy Partners, the two parties said in a joint statement late Monday.

The news gave the company’s debt a boost come Tuesday trading.

A trader said there was “heavy volume” in the 8 5/8% notes due 2020, which gained almost a point to close at 84 ¾.

The trader said there was less volume in the 6½% notes due 2019, though they ended up half a point at 82.

Another trader said the name was “up about a point,” placing the 8 5/8% notes in an 84½ to 85 context and the 6½% paper in an 82½ to 83 zip code.

Under the terms of the deal, Quantum will invest $1 billion in a new company that will acquire and develop oil and gas assets. Linn Energy will manage the company and will take a 15% to 50% direct working interest in the acquired assets.

With its debt-raising ability, the new entity could potentially fund over $2.5 billion in acquisitions and asset development. If the company looks to shed any assets, Linn Energy will get first dibs.

Cliffs gains ground

Cliffs Natural Resources’ debt gained ground as the company looked to sell $500 million of first-lien notes, priced to yield 9%.

At one desk, a trader said the 5.95% notes due 2018 put on almost a point to 78¼, while the 5.9% notes due 2020 rose a deuce to 67.

He also saw the 6¼% notes due 2040 gaining 1½ points to end at 58½.

However, he said the 4.8% notes due 2020 fell half a point to 60.

Another trader saw the 5.95% notes ending in a 78 to 79 context.

The new deal was slated to come at the discounted price of 93 and call protection was increased to three years from two years.

“They need to get that deal done to do that exchange,” a trader said, referring to the iron ore producer’s previously announced tender offer, which expires Wednesday evening. But “that pricing” on the first-lien issue could pressure the second-lien notes, he said.

Elsewhere in the iron arena, a trader said Magnetation LLC’s 11% notes due 2018 fell 4 points into the mid-40s from the high-40s.

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