Chesapeake Energy launches exchange offer, bonds sink; Toys ‘R’ Us mixed on early results

By Stephanie N. Rotondo

Seattle, Dec. 3 – Distressed debt investors were focusing on Chesapeake Energy Corp. on Thursday after the company announced a private exchange offer for 10 series of notes.

The Oklahoma City-based oil and gas company said late Wednesday that it would issue up to $1.5 billion of new 8% senior secured second-lien notes due 2022 for notes due 2017 through 2023.

The exchange will be done on a priority basis, with the nearer-term maturities receiving highest priority and therefore the highest compensation per each $1,000 of notes.

On the news, Chesapeake’s debt dropped.

One trader said the name was “pretty active” during the session. The 6½% notes due 2017 – for which holders will receive $970 of the new notes if tendered by the early deadline – “initially traded up,” the trader said, hitting a high of 80. But then the paper “came in hard,” ending at 73.

The 7¼% notes due 2018 were also higher at first, the trader noted, moving up to 65 before settling in around 63.

Holders of the 2018 bonds will receive $825 in new debt for each $1,000 of notes tendered.

At another desk, the 6 5/8% notes due 2020 were seen falling nearly 6 points to 44½ bid. A second source placed that issue in a 42 7/8 to 43 1/8 context, down from levels around 48½ previously.

Holders of the 6 5/8% notes will get $610 in new notes for each $1,000 of notes tendered.

The early deadline is 5 p.m. ET on Dec. 15. The overall offer expires at 11:59 p.m. ET on Dec. 30, with settlement expected Dec. 31.

Toys’ ends mixed

Toys ‘R’ Us Inc.’s debt was mixed in Thursday trading, just one day after the company presented at the Bank of America Merrill Lynch Leveraged Finance Conference.

In its presentation, the Wayne, N.J.-based toy retailer released preliminary results for the third quarter.

A market source called the 7 3/8% notes due 2018 off by almost 2 points at 62½ bid. However, another source deemed the 10 3/8% notes due 2017 as slightly better, trading in a 75¾ to 76 range.

For the third quarter, Toys “R” Us saw net sales slip to $2.33 billion from $2.46 billion the year before. However, when adjusted to foreign currencies, net sales rose to $2.46 billion, or flat year over year.

Domestic same-store sales remained tight, falling 1% for the quarter. But international sales continued to be strong, rising 2.9%.

On a consolidated basis, same-store sales were up 0.6%, versus a 0.1% decline the previous year.

Adjusted EBITDA meantime improved to $34 million from $3 million.

The company noted that it did not have any significant maturities until August 2017, providing “a clear path for business plan execution.”

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