Linn Energy trading flat after missed coupon payment; Energy XXI also skips coupon; Valeant down

By Stephanie N. Rotondo

Seattle, March 15 – The distressed energy space had two issuers skipping coupons due on Tuesday, a move that was at least partly expected given the depressed nature of the commodity.

Linn Energy LLC failed to pay a $30 million interest payment on its 7¾% notes due 2021, a $12 million payment on its 6½% notes due 2021 and another $18 million payment on Berry Petroleum Co. Inc.’s 6 3/8% senior notes due 2022.

In response, the bonds traded up, but a trader noted that the debt was now trading without accrued interest, “so versus yesterday, [the levels] are probably not much different.”

At one desk, the 7¾% notes were seen at 10¾ bid, 11¾ offered, up 5 points. The 6½% notes were up several points as well, trading in a 10 to 11 context.

As for the Berry issue, those were seen at 17 5/8 bid, 17 7/8 offered, a gain of about 2 points on the day.

Another market source called the 7¾% notes up 5 points at 11½ bid.

Linn also said on Tuesday that it was in default under its $3.6 billion credit agreement, as well as on its second-lien notes.

The company said it was reviewing its strategic options in order to deal with the default issues amid a “difficult commodity price environment.”

Energy XXI Ltd. also skipped a coupon payment on Tuesday. The company missed an interest payment on its 11% second-lien debt, as well as its 6 7/8% notes.

There was very little trading in those issues, a market source reported. That could indicate that the move was expected.

However, the company said it did finally make the interest payment on its 8¼% notes due 2018, which came due Feb. 16. When it announced that it was not making that payment in an effort to preserve liquidity, the company warned that it could file for bankruptcy should oil prices fail to recover.

While domestic crude prices have rebounded recently, this week has seen a return to losses as concerns about oversupply flourish.

Oil declined 1.24% in Tuesday trading, falling to $36.72 a barrel.

Valeant debt dives

Valeant Pharmaceuticals Inc. bonds edged closer to distressed territory on Tuesday after the company delayed filing its latest 10-K.

The delay could result in a default on the company’s bond indentures. That in turn could trigger a cross-default of its bank credit agreements.

The company had warned that the filing could come later than necessary, as it was investigating its accounting practices. That came on the heels of an investigation from the Securities and Exchange Commission in regards to its relationship with pharmacy Philidor.

Though the Canadian drug producer has 60 days to cure the default, the bonds “got smoked,” according to one trader.

He said the 6 1/8% notes due 2025 traded “down over 10 points” to 76.

At another desk, the 7½% notes due 2021 were deemed down 8½ points at 85 bid.

While Valeant did not officially file its latest quarterly report, it did release unaudited results. It also cut its 2016 guidance.

Net loss for the fourth quarter was $336.9 million, due to low sales, the company said. For the first quarter of 2016, revenue expectations were slashed to $2.3 billion to $2.4 billion, down from previous forecasts of $2.8 billion to $3.1 billion.

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