Distressed debt improves after volatile week; Pacific Rubiales dives as deal nixed; Caesars up

By Stephanie N. Rotondo

Phoenix, July 9 – The distressed bond market was improving Thursday, following several consecutive sessions of losses.

The gains came as the broader markets also gained ground, given that China’s five-day equity sell-off was halted due to new supportive measures and investors were optimistic a Greek debt deal would get done soon.

However, the market’s renewed strength was not applicable to every name.

Pacific Rubiales Energy Corp.’s debt took a massive downturn during trading after the company said late Wednesday that Alfa SAB de CV and Harbour Energy Ltd. had terminated a buyout agreement.

The bonds declined 9 to 10 points on the news.

On the positive side, Caesars Entertainment Corp. bonds were inching upward. On Wednesday, it was reported that creditors of the bankrupt unit, Caesars Entertainment Operating Co. LLC, were nearing a revised restructuring agreement with the parent company.

Away from news-driven names, commodities continued to be actively traded. But most names saw a bounce in their bonds, which had fallen off precipitously earlier in the week.

For instance, California Resources Corp.’s 6% notes due 2024 inched up a quarter-point to 82¼, on “boatloads of trades,” a trader said.

Among iron ore producers, a trader said Fortescue Metals Group Ltd.’s debt “rallied at the beginning of the day,” though he saw the name settling back in by the end of the day.

Still, paper ended in higher territory.

The trader called the 9¾% notes due 2022 putting on 2½ points to close at 97¼. The 8¼% notes due 2019 were up a deuce at 77.

However, another market source pegged the 6 7/8% notes due 2022 at 61¾, off nearly 4 points.

In Cliffs Natural Resources Inc.’s 5.95% notes due 2018, a trader called the bonds a point better at 62.

Pacific Rubiales buyout nixed

Pacific Rubiales’ debt dove Thursday after Alfa and Harbour Energy nixed plans to buy the Canadian oil and gas company.

A trader said there were “a lot of trades” in the 5 5/8% notes due 2025, which dropped 9 points to just north of 64. The 7¼% notes due 2021 meantime weakened over 10 points to just over 72.

Another trader said the 5 3/8% notes were down “about 10 points,” trading into “the low-70s.”

The $1.57 billion buyout was first proposed in May. Under the terms of the deal, Pacific Rubiales is not required to pay a termination fee.

There was no reason given for the terminated agreement, though some Pacific Rubiales shareholders were vehemently against the deal. The company itself claimed that the all-cash offer maximized value for its shareholders.

Caesars moves up

Caesars Entertainment bonds were climbing up Thursday as it was reported that junior creditors were nearing a deal to restructure the bankrupt operating unit.

A trader said the 11% notes due 2021 rose 1½ points to 85¾, while the 8% notes due 2020 improved 1¼ points to 96.

The trader also saw the 10% notes due 2018 inching up half a point at 27 7/8.

Another market source placed the 10% notes at 28¼ bid, up a point.

On Wednesday, Bloomberg reported that Paulson & Co. was among a group of creditors that had been working with the parent company on a revised restructuring plan for the opco. A previously proposed plan has failed to garner the needed support and word is that the deal currently being discussed would provide better terms to creditors, including more equity and shares in Caesars Acquisition Co.

While those talks go on, the parent company is also in talks with first-lien creditors about a restructuring support agreement the group had previously agreed to. But the talks are necessary because the company has failed to hit certain milestones required under that agreement.

© 2015 Prospect News.
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