Intelsat gains on tender news; Linn Energy rises post-filing; Chesapeake plans debt-for-equity swap

By Stephanie N. Rotondo

Seattle, May 12 – A slew of fresh headlines were pushing around distressed bonds on Thursday.

A trader said Intelsat SA and Linn Energy LLC were “two of the more active names” in trading. Intelsat was busy after the company announced a tender offer via its subsidiary, Intelsat Jackson Holdings SA, for up to $625 million of three series of notes. Linn, for its part, traded actively – and better – following news the company, along with Berry Petroleum Co. LLC, had filed for Chapter 11 protections.

Linn’s filing, along with that of Penn Virginia Corp., pushed up the high-yield energy sector default rate to about 13%, compared to 10.7% at the end of April.

Chesapeake Energy Corp. was also in the news after announcing a debt-for-equity swap. Those bonds trended higher as well.

In other restructuring news, Denbury Resources Inc. paper improved in the wake of its announcement on Wednesday that it had swapped $922.5 million of notes for $531.2 million of new notes.

Intelsat’s movements aside, investors continued to focus on the commodity arena.

Yet another gain in crude oil was also helping energy sector preferreds initially inch upward, but paper eventually gave up their ground.

“Oil continues to eke up here,” a trader said.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were up 7.45 cents, or 7.23%, at $1.1045 in early trading. The rally came after two days of hefty losses following the company’s earnings release late Monday.

However, the losses continued to mount by the bell, as the units finished off down over 5 cents, or 5.05%, at 97.8 cents.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) were meantime up 15 cents, or 2.77%, at $5.56 at mid-morning. That issue gave up those gains to end down 4 cents at $5.37.

For its part, domestic crude was up nearly 1% at mid-morning, ticking up toward $47 a barrel – a new 2016 high. While the commodity did finish the session higher, it was off from the day’s highs.

The gains came as the International Energy Administration said demand was increasing, while production was slowing.

Intelsat plans tender offer

A trader said Intelsat was “one of the main names” in Thursday trading, as the company launched a tender offer at its Intelsat Jackson unit.

The trader said the Jackson-linked paper “initially popped” on the news, but that “as the day went on it kind of came back to earth.”

The 5½% notes due 2023 traded up as high as 72, but went out “around 69,” the trader said. The 7¼% notes due 2020 – an issue not included in the tender – soared to a 78 to 79 context before settling back in to 74 to 75.

At another shop, the 6 5/8% notes due 2022 were seen at 73¾, up 3 points for the day.

Under the terms of the tender, Intelsat Jackson will exchange up to $815.25 million of the 6 5/8% notes for $740 per each $1,000 of notes; up to $2 billion of the 5½% notes at $730 per each $1,000; and up to $1.15 billion of the 7½% notes due 2021 for $775 per each $1,000.

There is a $20 early tender premium for each $1,000 tendered by 5 p.m. ET on May 25.

The tender will expire at 11:59 p.m. ET on June 9.

News of the tender came after the Jackson unit said in a regulatory filing that it had repurchased approximately $460 million of its 6 5/8% notes since April 28. The notes were acquired via the open market as well as from privately negotiated purchases, all at a discount to par.

Intelsat is a Luxembourg-based commercial satellite services provider.

Linn Energy files

Linn Energy said late Wednesday that it had filed for bankruptcy protections.

Come Thursday, the company’s debt was moving upward.

Linn’s 7¾% notes due 2021 “were better,” a trader said, adding that there was “a bunch of trading” in the bonds.

He pegged the issue at “+/-13”, a gain of 3 points.

Another market source saw the issue at 13½ bid, up 4½ points.

Linn said that its Berry Petroleum unit also filed for Chapter 11.

Under a plan inked with creditors, Linn will spin-off the Berry unit, which the company acquired in 2013. The deal also includes a new $2.2 billion reserve-based term loan and a term loan credit facility.

Linn also said that it had enough cash on hand to avoid securing a debtor-in-possession facility.

However, junior creditors have not signed on to the deal and filed their own plan that would give them control of the company.

Chesapeake ends firm

Chesapeake Energy debt traded higher after the Oklahoma City-based oil and gas producer said it would swap $153 million of debt for 28.1 million common shares – or about $122.5 million worth of equity, based on Wednesday’s closing share price.

A trader saw the 8% second-lien notes due 2022 rising “about a point” to 67 bid, 68 offered. Some of the shorter paper, such as the 6½% notes due 2017, traded up “about 3 points” to “around 91.”

Another source called the 6 5/8% notes due 2020 a point better at 56 bid.

Not everyone was enthused by the news, however.

“Converting $153 million of $2.8 billion into equity is 5.5% of the upcoming maturities – a drop in the bucket,” wrote Gimme Credit LLC analyst Philip C. Adams. “So kudos to all involved for the effort, but there’s a lot more rock to drill, and this isn’t enough to change our call on [the company’s] bonds.”

Gimme Credit has a “Deteriorating” view on the company.

Denbury up on swap news

Denbury Resources said on Wednesday it had swapped $922.5 million of three series of notes for $531.2 million of new 9% senior secured second-lien notes due 2021.

The news gave a boost to its bonds come Thursday trading.

A trader said the name was “better, maybe up about a point,” seeing the 5½% notes due 2022 closing “around 62.”

At another desk, the 6 3/8% notes due 2021 were deemed up a point at 63¾.

In response to the exchange, S&P Global Ratings cut Denbury’s rating to SD from CC, given that the agency sees such an exchange as tantamount to default.

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