SandRidge bonds jump on debt repurchase and exchange news; Abengoa rebounds; Murray debt tanks

By Stephanie N. Rotondo

Phoenix, Aug. 14 – Strength was returning to the distressed debt market on Friday as a combination of fresh economic data and credit-specific news helped drive bonds higher.

On the heels of Thursday’s positive retail sales report, new data out Friday – including readings from the U.S. Producer Price Index – indicated that inflation was inching up. That data was taken as a strong argument for a potential interest rate hike in September from the Federal Reserve.

In distressed dealings, SandRidge Energy Inc. got a decent boost after the struggling oil and gas producer announced a debt redemption and exchange totaled at $525 million.

A trader said the company’s bonds were up as much as 4 to 5 points during the session, though they “settled in” by the close.

Abengoa SA meantime posted huge gains on the day, following an outpouring of headlines. Bloomberg reported that banks were advising the Spanish company to increase its proposed rights offering amount – though that claim was later denied.

But for all the day’s strength, some names just couldn’t catch a break.

Murray Energy Corp., for instance, saw its debt take a big hit after the coal producer lowered its outlook.

The change in guidance came just after the company announced the purchase of its first overseas assets.

SandRidge soars

SandRidge Energy bonds popped in Friday trading after the company said it was repurchasing $250 million of debt and exchanging another $275 million bonds for new convertible notes.

“They are all up,” the trader said.

The 8¾% notes due 2020 closed over two points better at 68 3/8, the trader said. The 7½% notes due 2021 put on 3½ points, ending at 29½, while the 8 1/8% notes due 2022 rose nearly that much to 28½.

The trader remarked that the 8¾% notes and the 7½% notes were the day’s “top traders.”

Another market source saw the 7½% notes due 2020 at 29 bid, up 4 points.

Oklahoma City-based SandRidge announced the privately negotiated purchase and exchange agreements on Friday. Under the terms of the deal, $29.3 million of the 8¾% notes, $111.6 million of the 2021 paper, $26.1 million of the 8 1/8% notes and $83 million of the 7½% notes due 2023 will be repurchased at a discounted price, totaling $94.5 million in cash.

Additionally, $15.9 million of the 8¾% notes, $40.7 million of the 2021 bonds, $101.8 million of the 2022 maturity and $116.6 million of the 2023 paper will be exchanged for $158.4 million of new 8 1/8% convertible notes due 2022 and $116.6 million of 7½% convertible notes due 2023.

The move not only reduces the company’s outstanding debt, but is also expected to reduce annual interest expense by $19 million.

Abengoa rallies

Abengoa’s debt recovered some of the losses incurred this week on reports the company was “going to raise more cash to ease debt concerns,” a trader said.

The trader said he saw “big moves in both” the 6½% notes due 2019 and the 8 7/8% notes due 2017. He called the former up 13 points at 53½, while the latter rose 6 points to 59.

Last week, the Seville, Spain-based renewable energy company presented to investors a capital plan that included a €650 million rights issue, as well as the divestment of about €500 million in assets.

Investors appeared skeptical that such efforts could get done, however, and the bonds began to drop significantly.

On Friday, Bloomberg reported that “people familiar with the matter” said banks were advising Abengoa to up the rights issue to €800 million.

Reuters later reported that Abengoa was denying such claims.

Murray gets beat up

Murray Energy paper got whacked Friday after the St. Clairsville, Ohio-based coal company reduced its earnings outlook for the year.

A trader said the 11¼% notes due 2021 declined “almost 10 points” to 48 in the wake of the news.

In a presentation to investors on Friday, Murray said it expected full-year earnings to be between $600 million to $660 million, down from previous projections of $648 million to $790 million.

Furthermore, it forecast 2016 EBITDA of $625 million to $675 million.

The weaker guidance came less than 24 hours after it was announced that Murray had purchased a Colombian mining operation from Goldman Sachs Group Inc. at a steep discount.

The purchase price was less than $10 million, according to news reports. The deal closed on Thursday.

The asset sale marks Goldman’s exit from the coal arena and Murray’s efforts to expand internationally amid slowing domestic demand.

© 2015 Prospect News.
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