Midstates Petroleum rises after liquidity transaction disclosures; LightSquared pricing widens

By Stephanie N. Rotondo

Phoenix, May 22 – With little else going on in the distressed debt arena on Friday – due to the long Memorial Day weekend – a trader said Midstates Petroleum Co. Inc. was “topical.”

Late Thursday, the Tulsa-based oil and gas producer announced several actions it had taken in an effort to shore up its liquidity, including wrapping up a private placement of $625 million of 10% second-lien notes.

Concurrently with that offer, Midstates exchanged about $280 million of 10¾% notes due 2020 and just over $350 million of 9¼% notes due 2021 for new 10% third-lien notes PIK notes due 2020.

The exchange was done at 80 cents on the dollar, the company said in a press release.

Last but not least, the company amended its revolving credit facility to provide covenant flexibility and to allow for the issuance of the second-lien notes and concurrent exchange. In amending the facility, the company’s borrowing base was reduced to $253 million.

All told, the transactions provided a “substantial” increase in liquidity, which came to $420 million.

On the news, a trader said Midstates’ debt “kind of traded up from the lows.”

He saw the 9¼% notes moving up to a 45 to 46 context from 44. He also deemed the 10¾% notes “a little bit better” in a 47½ to 48 zip code.

In response to the liquidity-enhancing transactions, Standard & Poor’s cut its corporate credit rating on the company to SD from B-, deeming the deals a selective default.

The rating agency also revised its recovery ratings on the unsecured notes to 6 from 5, indicating minimal recovery in the event of a restructuring.

LightSquared ups pricing

LightSquared widened pricing on its $1.75 billion five-year first-lien term loan to Libor plus 875 bps PIK from Libor plus 775 bps PIK and left the 1% Libor floor and original issue discount of 97 unchanged, according to a market source.

In addition, the call protection on the term loan was modified to non-callable for two years, then at 104 in year three and 102 in year four, from non-callable for one year, then at 102 in year two and 101 in year three, and the ticking fee was revised to 1% for the first 90 days, 1.5% for days 91 to 120, 2.5% for days 121 to 150 and 3% thereafter, from 1% for the first 120 days and an additional 1% after 120 days, the source said.

Commitments are due at 3 p.m. ET on May 29, pushed out from an original deadline of Wednesday.

Credit Suisse Securities (USA) LLC, Jefferies Finance LLC and Morgan Stanley Senior Funding Inc. are leading the deal that will be used to fund the company’s exit from Chapter 11 and refinance debtor-in-possession facilities.

LightSquared is a Reston, Va.-based wireless communications company.

Sara Rosenberg contributed to this article

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