Freeport-McMoRan debt improves on asset sale news; Energy XXI mixed as coupon skipped; oil space up

By Stephanie N. Rotondo

Seattle, Feb. 16 – Fresh news combined with a generally firmer marketplace was helping to push up distressed bonds on Monday.

A trader said Freeport-McMoRan Inc. debt was once again “very active,” with the bonds rising several points in the session. The gains came as the company announced it was selling a 13% stake in one of its Arizona-based copper mines for $1 billion.

Also in the commodities space, oil and gas names were firming on reports four top oil producers – including Russia and Saudi Arabia – had proposed freezing crude production at January levels.

Though the initial enthusiasm for the news faded – and with it crude prices – the sector’s debt was still largely better for the day.

Even Energy XXI Ltd. bonds were better, despite news the company was skipping a coupon payment and that it was discussing alternatives with debtholders.

Elsewhere in the sector, Chesapeake Energy Corp.’s 3¼% notes due 2016 inched up a point to 93½, according to the trader. That issue began to pop on Friday when it was reported that the company planned to take out the $500 million issue when it matures next month.

Denbury Resources Inc.’s 5½% notes due 2022 were also better, adding almost 2 points to close at 20¼.

Another gainer was Whiting Petroleum Corp. Its 6¼% notes due 2023 firmed a deuce to close at 42, according to a trader.

But Memorial Production Partners LP went against the grain for the day, as its 7 5/8% notes due 2021 were seen slipping over half a point to 24 7/8.

Freeport rises on asset sale

Freeport-McMoRan announced an asset sale over the weekend. Come Tuesday, its bonds were trading “very active” and better, according to a trader.

The trader said the 3.55% notes due 2022 improved nearly 3 points to 51¾. The 4.55% notes due 2024 meantime gained over 2 points, ending at 50¾.

As for the 2 3/8% notes due 2018, they were up almost 6 points, closing at 72¾. The 5.45% notes due 2043 rose 1½ points to 46.

The Phoenix-based metals and mining company said Sunday that it had agreed to sell a 13% stake in its Morenci copper mine in Southeast Arizona for $1 billion in cash. The company is selling the stake to its joint venture partner, Sumitomo Metal Mining Co.

Proceeds will be used to help the company reduce its $18.4 billion debt load.

Energy XXI skips coupon

Energy XXI’s bonds moved up in Tuesday trading, despite news the company had opted to forgo an interest payment on the 8¼% notes due 2018.

A trader said the issue traded up 1½ points to 4½, adding that the paper was trading flat, or without accrued interest.

The 9¼% notes due 2017 meantime traded off a deuce to 3, on “good volume,” according to a trader.

The Houston-based oil and gas producer said that while it had enough cash to make the payment, it thought it would be better to preserve liquidity. Additionally, the company said it was in talks with debtholders in regards to potential restructuring options.

Energy XXI also said it had hired PJT Partners LP and Vinson & Elkins LLP as financial and legal advisers, respectively, as it considers its options.

The company now has 30 days to make the payment or be considered in default, which could accelerate other debt instruments.

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