Distressed bonds weaken on Belgium attacks; Chesapeake slips, EP Energy slightly better; SunEdison off

By Stephanie N. Rotondo

Seattle, March 22 – The distressed debt market was on the softer side Tuesday, following a string of terrorist bombings in Belgium.

The broader markets were also weak on the news, though there was a brief run up into positive territory.

As the markets came in, so did oil prices. The flight to safer havens such as gold was also due in part to Libya stating that it would not participate in an upcoming OPEC meeting to discuss production freezes.

In response, oil and gas names like Chesapeake Energy Corp. were trending lower.

The 8% second-lien notes due 2022 fell almost a point to 56¼, according to a market source.

Another market source, however, deemed the 6 5.8% notes due 2022 up a deuce at 45 bid.

Meanwhile, the 2.5% convertible notes due 2037 were trading off 2 to 3 points, according to a market source.

The notes were pegged in a 75 to 76 context early in the session, but came in even more to close at 73 bid, 73.25 offered.

That compared to levels around 75 at the open, which was off from Monday’s closing price around 78.

The 2.25% convertible notes due 2038 were meantime about unchanged, trading around 45.375.

The Oklahoma City-based oil and gas producer’s equity was down 6 cents, or 1.23%, at $4.82.

Elsewhere in the oil and gas arena, EP Energy Corp.’s 9 3/8% notes due 2020 – an issue that was “soaring” on Monday on word of a $420 million asset sale – ticked up modestly to 55¼.

“There were tons of trades, but no real movement,” a trader said, calling the paper up a quarter-point.

SunEdison searching for DIP

SunEdison Inc.’s 3.375% convertible notes due 2025 dropped Tuesday, as it was reported that the struggling solar company was in talks with holders of its second-lien loans to fund a debtor-in-possession facility.

A market source saw the issue at 4 bid, 4.125 offered, down from 8.5 at the open.

The stock meantime fell 52 cents, or 25.87%, to $1.49.

SunEdison is reportedly looking for a $300 million DIP. Its efforts to secure such a facility indicate that attempts to restructure its nearly $2.4 billion in debt out of court failed.

Last week, the company also delayed filing its latest quarterly report, for the second time. The company attributed the delay to issues associated with its new IT system.

Fannie, Freddie mixed

Fannie Mae and Freddie Mac preferreds were on the busier side in an otherwise light volume day, as the Federal Housing Finance Agency said it was still considering mortgage debt reduction for underwater borrowers.

“If they do, it could affect some REITs,” a trader speculated.

In trading, the GSEs preferreds were mixed.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were off 4 cents, or 1.29%, at $3.06. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) inched up a penny to $3.09.

On Monday, The Wall Street Journal reported that the FHFA had approved a plan to reduce the principal amount on some underwater mortgages.

The Journal cited “people familiar with the matter.”

However, other news outlets picked up the story and when they asked the FHFA for comment, it would only say that such an idea is “still under consideration.”

Democrats and housing advocates have been pushing for such moves, but thus far nothing has been done – in part because with Fannie and Freddie still under conservatorship, taxpayers could still be on the hook in case of another crisis.

Cumulus loan falls

Cumulus Media Inc.’s term loan headed lower in the secondary market on Tuesday as the company revealed in an 8-K filed with the Securities and Exchange Commission that it has recently entered into non-disclosure agreements with certain holders of its 7.75% senior notes due 2019 regarding a potential exchange transaction, according to a trader.

Post-news, the term loan was quoted at 70 bid, 72 offered, down from 72½ bid, 73½ offered, the trader said.

Under the proposal, the notes would be exchanged for up to 42.5% of the principal amount of each note in certificates, with the certificates representing interests in a trust that would hold a participation in the company’s $200 million revolver.

Lenders under the revolver would assign their commitments to a new lender.

Exchanging noteholders would also receive a pro rata share of an offering of 19.9% of the company’s pro forma outstanding common stock after taking into account such issuance and full participation of the notes in the exchange.

In addition, as part of the exchange proposal, Cumulus Media would amend its revolver to extend the maturity to May 15, 2020, increase pricing to Libor plus 1,100 basis points with a 1% Libor floor and lift the undrawn commitment fee to 5%.

Furthermore, the amendment would revise the financial covenant to permit borrowing under the revolver in connection with the exchange, require compliance with a consolidated first-lien net leverage ratio of 3.75 times for future draws and eliminate the financial maintenance covenant.

Discussions have also included the company potentially using additional capital to facilitate full participation by holders of notes in the exchange.

The company went on to say in the 8-K filing that there is no assurance that the exchange will take place on the same or similar terms to those set out above, on different terms or at all.

Cumulus Media is an Atlanta-based radio broadcaster.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.