Chesapeake Energy continues to trend down; energy space mixed as oil gyrates; Sprint bonds improve

By Stephanie N. Rotondo

Seattle, Feb. 10 – The distressed debt market remained focused on energy names on Wednesday as oil prices remained depressed.

Domestic crude dropped 1.68% to $27.47 a barrel, despite a surprising drawdown of U.S. stockpiles. However, the commodity had rebounded initially, trading with a $29 handle.

The rebound was short-lived as OPEC then released data that showed higher global inventories than expected.

In the energy space, Chesapeake Energy Corp. continued to be the top trader, according to market sources.

There were “tons of trades” in the 8% second-lien notes due 2022, a trader said. He called the issue off nearly 4 points at 32¼.

However, he saw the 6 5/8% notes due 2020 rising almost a point to 14¼.

Another trader said the name traded off 2 to 3 points on the day, pegging the 8% notes in a 32 to 33 zip code.

That trader did see the 3¼% notes due 2016 bouncing back a bit to end in the mid-80s. That compared to previous levels around 80, he said.

“I guess the prospects that those bonds get taken out were better today...in somebody’s opinion,” he remarked.

Rumors of a potential bankruptcy filing on Monday put pressure on the Oklahoma City-based oil and gas producer’s debt – even after it issued a statement refuting the chatter. But as oil prices have dwindled in the last year and a half, the company has been looking at ways to reduce its debt and improve its bottom line. In December 2015, the company did a debt exchange, swapping $3.8 billion of 10 series of old notes for about $2.4 billion of the new 8% second-lien notes.

The company referenced said exchange in its statement out Monday. It also said that reports it had hired Kirkland & Ellis LLP to look into restructuring options were overblown, given that the firm has been advising Chesapeake since 2010 and did advise on the recent debt exchange.

“Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders,” the statement read.

Elsewhere in energy, the results were mixed.

Denbury Resources Inc.’s 6 3/8% notes due 2021, for instance, were seen off 7½ points at 22 7/8. But its 5½% notes due 2021 were deemed unchanged at 19.

California Resources Corp.’s 5½% notes due 2021 were meantime pegged at 10½, up a touch. The 6% notes due 2024 were down a similar amount at 10 3/8.

Another trader called the 8% second-lien notes due 2022 down a couple points at 21.

Legacy Reserves LP’s 6 5/8% notes due 2021 closed at 12, off over 4 points, a trader said.

“They really punish these energy companies,” he commented.

Sprint ends positive

Away from energy, Sprint Corp. paper was active following positive earnings from its main investor, Softbank Group Corp.

A trader said the 7 7/8% notes due 2023 were “pretty active,” rising to “65-ish” from 63 previously. The 6 7/8% notes due 2028 improved to a 64½ to 65 context, compared to 61-62 the day before.

Another market source saw the 6% notes due 2016 at 99¼ bid, up nearly a point.

SoftBank, which has a controlling stake in Sprint, reported a 7.3% gain in operating income for its fiscal third quarter. Net income, however, dropped 88%.

Still, Masayoshi Son, chairman of SoftBank, said that the company was confident in Sprint’s ability to turn itself around, noting that there were additional cost-cutting measures that could be taken.

© 2015 Prospect News.
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