Halcon Resources boosted by exchange news; iron, coal weaker; Fannie, Freddie preferreds mixed

By Stephanie N. Rotondo

Phoenix, April 9 – It was a mixed day for the distressed debt market on Thursday.

The focus continued to be on commodities and that arena was following the trend of the day.

In the oil and gas space, Halcon Resources Corp. was “up a bunch,” according to a trader, after the company announced it had agreed to exchange $116.5 million of its 9¾% notes due 2020 for stock.

The gains coincided with a slight upward move in oil prices.

But while oil and gas names were firming, iron ore and coal were weaker.

Iron ore producer FMG Resources’ 8¼% notes due 2019 fell 3 to 4 points to a 77 to 78 context, a trader said.

Among coal names, Walter Energy Inc.’s 9½% notes due 2019 fell to 56.

“There’s more chatter about a restructuring,” a trader said.

Peabody Energy Corp. was also “off a little bit,” a trader said.

He saw the 10% second-lien notes due 2022 at 87½ bid, 88 offered.

Another market source pegged the 6½% notes due 2020 at 63 bid, down almost 2 points on the day.

And, Alpha Natural Resources Inc.’s 6¼% notes due 2021 came in half a point to 25½ bid.

Halcon up on exchange

Halcon Resources’ 9¾% notes “got as high as” 80 during Thursday trading, but “came back in some,” ending with a 77 handle, a trader said.

That was still up 4 points on the day.

The bonds’ performance came as the Houston-based oil and gas company said it had entered into an exchange agreement with holders of the notes, in which the company will exchange $116.5 million of the bonds for 65.5 million shares of stock.

The exchange price was about $1.78 per share.

The debt might have also been impacted by a modest gain in oil prices.

West Texas Intermediate crude ended up 25 cents at $50.67 per barrel. Brent crude closed up $1.06, or 1.91%, to $56.61.

Other names in the sector were also ending with a positive tone.

SandRidge Energy Inc.’s 7½% notes due 2021 rose almost a point to 67 bid.

Fannie, Freddie mixed

Fannie Mae and Freddie Mac preferreds remained actively traded on Thursday, as investors continued to react to news out Wednesday regarding Sen. Charles Grassley and his questions about the government’s decision to take over the agencies’ profits.

But while the preferreds ended the previous session with a firmer tone, they finished Thursday’s session mixed.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) 3 cents higher at $4.49, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) were a nickel lower at $6.95.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) finished unchanged at $4.50.

Shareholders have filed several lawsuits against the government over its 2012 decision to take the majority of Fannie and Freddie’s profits as the agencies continue to operate under conservatorship. In the course of those lawsuits, certain documents have been requested from the government, but each request has gone unanswered. In some cases, the government has even claimed presidential privilege.

In particular, shareholders are looking for documents relating to the 2012 decision, but thus far, none have come.

In his letter, Sen. Grassley also expressed questions about the decision and asserted that taxpayers have “a right to know what has transpired.

“But, instead of transparency, there appears to be an invocation of executive privilege. If true, this is cause for concern,” Grassley wrote in his letter.

Since the decision, Fannie and Freddie have proved to be quite profitable for the Treasury. After the two GSOs received $187.5 billion in 2008, the market began to stabilize and the companies began to return to profitability. As of March 31, Fannie and Freddie have repaid a total of $228.3 billion back to taxpayers, over $40 billion more than it originally received.

With the bulk of their profits being taken away, the ability to create a capital cushion has been near impossible and recoveries for shareholders are believed to be nil.

In his letter, Grassley gave the Justice and Treasury departments until April 20 to respond.

© 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.