Chesapeake Energy bonds up on gathering agreement; Getty Images quiet; Fannie, Freddie advance

By Stephanie N. Rotondo

Phoenix, Sept. 8 – It was a “generally upbeat day” in the distressed debt market, a trader reported Tuesday.

“Some things traded up with the market,” a second trader said, adding that there “wasn’t a ton of volume.

“People are getting back from a long weekend,” he noted.

Chesapeake Energy Corp. was topical for the day, as the Oklahoma City-based oil and gas company announced a new gas gathering agreement with the Williams Cos.

Not as topical, however, was Getty Images Inc., despite news the company was gearing up for a $100 million debt issue.

“I think that news has already got to be in the market,” a trader said, noting that the company had indicated that such issuance was likely during a conference call in early August.

During that call, Chesapeake also reported that it had hired Guggenheim Securities LLC to explore the potential sale.

Some bondholders have also reportedly expressed an interest in exchanging their holdings for new debt.

A trader said he had not seen any of the 7% notes due 2020 trade, but added that the paper had been offered at 80 at the end of August.

Chesapeake debt rises

Chesapeake Energy’s bonds were gaining ground Tuesday as the market reacted to news of a new gas gathering agreement with The Williams Cos.

One trader said the 6 5/8% notes due 2020 were up “2 points from a week ago” at 83¼. He also saw the 6½% notes due 2017 inching up almost a point to 97¾, while the 5¾% notes due 2023 rose half a point to 76.

A second trader said the 6 5/8% notes were the “most active” of Chesapeake’s structure, ending “up a little bit” around “83-ish.”

That trader also pegged the 4 7/8% notes due 2022 up “a point or so” at 74½.

Under the new agreement with Williams and its subsidiaries, Chesapeake will move to a fixed-fee on both its Haynesville shale operating unit and at its dry gas Utica Shale asset in 2016. Fees at the Haynesvile property will also be reduced, allowing existing minimum volume obligations to be met.

Chesapeake will also be obligated to increase the number of online wells at Haynesville by 140 over the next two years.

GSE decision looms

A preferred stock trader said that Fannie Mae and Freddie Mac paper might pick up ground this week, as the discovery process in a lawsuit against the federal government is slated to conclude at the end of the week.

“The judge could decide on the sweep in October,” he said, referring to the 2012 conscription of the GSEs’ profits while under conservatorship. Shareholders have argued that the move was illegal.

In Tuesday trading, the preferreds were in fact inching upward.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose a dime, or 1.98%, to $5.14, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) improved 12 cents, or 2.4%, to $5.12.

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