Chesapeake Energy drops on amendment news; Goodrich preferreds pop; Teck dips on S&P downgrade

By Stephanie N. Rotondo

Phoenix, Oct. 1 – Distressed bonds continued to be weak in the first trading day of the month and the quarter.

Chesapeake Energy Corp. was particularly “heavy,” a trader said, following news the company had secured an amendment on its senior revolving credit line that would, among other things, allow for the issuance of up to $2 billion of junior debt.

“The bonds got hit,” the trader said, seeing both the 5 5/8% notes due 2020 and the 7¼% notes due 2018 falling 4½ points to 69¼ and 78½, respectively.

The trader also saw the 5¾% notes due 2023 losing over 2½ points to close at 63 3/8, as the 4 7/8% notes due 2022 dropped 3¼ points to 62½.

A second market source pegged the 6 5/8% notes due 2020 at 69¾, down almost 5 points.

The news was pushing “all the corporates” down, according to a convertibles trader.

He said there were “a bunch of sales” in the 2.5% convertible notes due 2037 at 85.25, which compared to levels with an 87 handle on Tuesday.

A second market source placed the issue in an 85 to 86 context, down from 87 to 88 previously.

The equity closed down 12 cents, or 1.64%, at $7.21. It was down nearly 4% at mid-morning.

But Chesapeake wasn’t the only oil and gas name ending with a softer tone. While crude oil prices spent most of the day on the rise, they ultimately finished marginally lower. Distressed bonds in the sector, however, acted like the commodity was in decline all day.

For instance, SandRidge Energy Inc.’s 8 1/8% notes due 2022 came in nearly 1½ points, a trader said, ending at 21½. Linn Energy LLC’s 6½% notes due 2019 were meantime seen off over a point at 26¾.

At another shop, Linn’s 7¾% notes due 2021 were deemed down 3½ points at 20½ bid.

California Resources Corp. was another name that got dragged down. The 6% notes due 2024 were called half a point lower at 59½.

In Denbury Resources Inc. paper, one trader said the 4 5/8% notes due 2023 declined nearly 2 points to 52¼. A second source pegged the 6 3/8% notes due 2021 at 61¾ bid, down over 2 points.

However, among distressed oil and gas preferreds, Goodrich Petroleum Corp. got quite the boost on the day.

The preferreds were the day’s biggest percentage gainers, by far – though the shares were trading sub-$1.00 prior to the day’s rally.

The 9.75% series D cumulative preferreds (NYSE: GDPPD) gained 80 cents in trading, doubling its price to $1.60. The 10% series C cumulative preferreds (NYSE: GDPPC) rose 96 cents, or 120%, to $1.76.

Dividends on both of those issues were suspended on Aug. 28.

Teck downgraded

Teck Resources Ltd. was downgraded by Standard & Poor’s on Thursday, which pushed the company’s debt lower.

A trader said the 3¼% notes due 2023 were down a deuce at 59¼.

S&P dropped the Canadian diversified resources company to BB from BB-, citing weak conditions in the metallurgical coal markets and expectations that those conditions will persist through 2017.

S&P’s action follows a similar one taken by Moody’s Investors Service on Sept. 14. Moody’s rating revision pushed the company into junk territory as the company was moved to Ba1 from Baa3.

Moody’s cited the declining price of commodities across the board as the basis for its change.

© 2015 Prospect News.
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