Oil pops on new data, boosts sector debt; Walter Energy skips coupon, in reorganization talks

By Stephanie N. Rotondo

Phoenix, April 15 – A surge in oil prices was beneficial for many distressed energy names Wednesday.

Oil prices popped as new data showed U.S. production was slowing down, giving rise to hopes that the market is stabilizing.

But away from oil and gas, there was news that put pressure on the coal space.

Walter Energy Inc. said that it was skipping coupon payments on its 9½% notes due 2019 and its 8½% notes due 2021. As it enters a 30-day grace period, the coal producer is in talks with debtholders on how to best address the company’s financial situation.

Meanwhile, Colt Defense LLC announced that it was conducting an exchange offer for its 8¾% notes due 2017. For each $1,000 of notes tendered, holders will receive $300 in new 10% junior priority senior secured notes due 2023.

Additionally, the West Hartford, Conn.-based gun manufacturer said it was seeking consents on a possible prepackaged bankruptcy plan, should the exchange offer fail to meet the minimum requirements.

The company is attempting to get 98% participation in the exchange. Holders who agree to approve the plan will receive an additional $50 in new notes.

There wasn’t much trading in the name on the heels of the news, a trader said. He did see quotes in the Street “for scraps” ranging from 25 to 27 bid, but “no real two-sided markets.”

Oil’s gains good for sector

For the second straight week, oil production in the U.S. has declined, according to the latest report from the Energy Information Administration.

That news resulted in a surge in oil prices, which then in turn helped boost the oil and gas space.

West Texas Intermediate crude improved $2.62, or 4.92%, to $55.91 per barrel. Brent crude rose $1.89, or 3.23%, to $60.32.

Energy XXI’s 7½% notes due 2021 put on nearly a point to close at 39¾, according to a trader. Comstock Resources Inc.’s 7¾% notes due 2019 meantime added almost 4 points, ending at 48¾.

A trader said Linn Energy LLC’s 7¾% notes due 2021 were “very active,” gaining 2 points to 87¼. The 8 5/8% notes due 2020 inched up over a point to 91¼.

Another market source saw Linn’s 7¾% notes at 87¼ bid, up over 2 points on the day.

But while there was definite strength in the sector, not every name was following the trend.

Samson Investments Co.’s 9¾% notes due 2020 ended a point lower at 10, a trader reported.

In Quicksilver Resources’ debt, the 9 1/8% notes due 2019 were deemed down 4 points from two weeks ago at 13¼. The 11% notes due 2021 were “about the same,” a trader said, placing the issue at 13¾.

U.S. crude production dropped 2% last week, to less than 9.4 million barrels per day, according to the EIA report. Only 1.3 million barrels were added to U.S. inventories, which missed expectations of a 3.6 million barrel increase.

Also, the International Energy Agency released a report that indicated demand was growing. Furthermore, the agency speculated that demand could increase by 1.1 million barrels per day.

Walter skips coupon

Walter Energy announced Wednesday that it was skipping interest payments on its 9½% and 8½% notes.

Though the company assured investors that it was not a liquidity issue – Walter had about $435 million in cash and investments as of March 31 – it did note that it was in talks with noteholders on a possible reorganization plan.

On the news, Walter’s 8½% notes slipped slightly to 6, a trader said. The 11% notes due 2020 closed off nearly half a point at 8½.

Elsewhere in the coal arena, bonds were trending mostly lower, though there were some bright spots.

A trader said Arch Coal Inc.’s 7¼% notes due 2021 fell a point to 22½, while the 9 7/8% notes due 2019 were down 2 points from the last trades a month ago at 28.

Peabody Energy Corp. paper was meantime mixed.

One trader said the 6¼% notes due 2021 rose a point to 59, but the 6½% notes due 2020 dropped 2 points to 60¾.

Another market source pegged the 6½% notes at 61, up 2½ points.

© 2015 Prospect News.
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