Distressed oil and gas debt pressured despite crude rise; Vanguard preferreds firm; Peabody up

By Stephanie N. Rotondo

Phoenix, Aug. 20 – The distressed debt market was sliding Thursday, following the broader markets lower amid emerging market fears.

Concerns about oil prices were also playing a role, though benchmark crude did finish the session modestly higher as September delivery contracts were slated to expire.

Still, distressed oil and gas names continued to be under pressure.

SandRidge Energy Inc.’s 7½% notes due 2021 fell a point to 28½ bid, 28¾ offered, according to one market source. The dip came as Moody’s Investors Service downgraded the Oklahoma City-based company to Caa2 from Caa1, citing the recently announced repurchase and exchange.

Conversely, Standard & Poor’s raised its rating on SandRidge to CCC+ from SD. The ratings agency also pointed to the repurchase and exchange as its reasoning for the move.

Last week, SandRidge said it had inked a deal to repurchase $250 million of senior notes at a discount. Additionally, it would exchange another $275 million of the notes for new convertible debt.

Meanwhile, Linn Energy LLC’s 7¾% notes due 2021 were pegged at 44¾ bid, off nearly 2 points on the day. Consol Energy Inc. was also weaker, closing off almost a point at 76¾ bid.

Vanguard declares distribution

Also in the oil and gas space, Vanguard Natural Resources LLC announced monthly distributions on its preferred units on Thursday.

Ahead of the announcement – which came just after the market closed – the 7.875% series A cumulative redeemable perpetual preferred units (Nasdaq: VNRAP) jumped 30 cents, or 1.46%, to $20.81.

The 7.625% series B and 7.75% series C units, however, were a little weaker.

The Bs (Nasdaq: VNRBP) dipped a penny to $16.15, while the Cs (Nasdaq: VNRCP) fell 8 cents to $16.65.

All three issues saw above average trading on the day.

The distributions – 16.41 cents per A unit, 15.885 cents per B unit and 16.146 cents per C unit – will be paid on Sept. 14.

The Houston-based oil and gas company also declared a distribution on its common units.

Peabody firms

Peabody Energy Corp. debt was on the rise as investors reacted to recent news indicating that billionaire investor George Soros had been snapping up coal stocks.

At one shop, Peabody’s 6% notes due 2018 were seen at 33 bid, 33¼ offered, up from 32¾ bid, 33 offered previously.

Another source saw the 6½% notes due 2020 ending up 1½ points at 28 bid.

The coal producer’s stock (NYSE: BTU) meantime closed up 30 cents, or 21.43%, at $1.70.

Though Soros has long been outspoken against fossil fuels, it was reported Wednesday that Soros Fund Management bought over 1 million shares in Peabody and over 550,000 shares in Arch Coal Inc. between April and June.

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