Distressed energy, mining bonds lose ground; Cumulus debt remains weak post-possible exchange news

By Stephanie N. Rotondo

Seattle, March 24 – The distressed bond market faltered in Thursday trading amid muted liquidity.

The session ended early due to the Good Friday holiday.

“A lot of things seemed like they were a smidge softer,” a trader said.

The trader also remarked that a fair bit of the day’s activity was centered on recently priced deals.

Away from new deals, a trader said energy and mining names were coming in along with commodity prices.

For its part, domestic crude oil was trading under the $40-mark for the second day, even as Baker Hughes reported that active U.S. drill rigs fell by 15 last week. That news did little to ease concerns of a supply glut after Wednesday’s report from the U.S. Energy Information Administration showed a crude inventory build of 9.4 million barrels last week.

That was about three times more than what analysts polled by Reuters had forecast.

A trader saw Chesapeake Energy Corp.’s 3.872% notes due 2019 dipping nearly a point to 41. Another trader said the 8% second-lien notes due 2022 dropped 3 points to a 50 to 51 zip code.

EP Energy Corp. – which had run up earlier in the week on news of a $420 million asset sale – was also weaker, a trader said. He saw the 9 3/8% notes due 2020 declining 3 points to 51¾.

In the mining arena, Freeport-McMoRan Inc.’s 3.55% notes due 2022 were deemed down 2½ points at 70½.

“There was decent volume,” a trader said of the issue. “But not crazy.”

Hazy days for Cumulus

Cumulus Media Inc.’s 7¾% notes due 2019 were losing ground on Thursday, as the market continued to react to news of a potential exchange offer.

One trader called the issue off almost a point at 38¾. Another trader said the paper was “still active” around 39.

On Tuesday, the Atlanta-based radio broadcaster said in an 8-K filing that it had recently entered into non-disclosure agreements with certain holders of its 7¾% notes regarding a potential exchange transaction.

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.

© 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.