Chesapeake Energy gains with oil, debt exchange; EXCO falls; Teck trades mixed post-tender news

By Stephanie N. Rotondo

Seattle, May 24 – Distressed oil and gas names were trading actively and better on Tuesday, helped in part by a gain in oil prices.

Domestic crude improved by 1.5% during the session, as concerns about supply disruptions continued to encourage the market that the current oversupply would wane.

Chesapeake Energy Corp. was also buoyed by news out late Monday regarding yet another debt-for-equity swap.

A trader said the 8% second-lien notes due 2022 gained “almost 3 points” to close at 77 1/8, on “a slug of trades.”

Another market source placed the 6 5/8% notes due 2020 at 62 bid, up 4 points.

In a regulatory filing Monday, the Oklahoma City-based oil and gas producer said it was exchanging $166 million of upcoming maturities and puts for approximately 37 million shares of equity.

Philip C. Adams, an analyst with Gimme Credit LLC, said in an afternoon comment published Tuesday that while the exchange “would seem helpful to [the company] from a liquidity perspective,” the overall strength of the company would mostly depend on how commodity prices fare in the near term.

“We suspect there are limits to the amount of debt that can be retired via additional private transactions,” Adams wrote.

Elsewhere in the oil arena, EXCO Resources Inc. debt bucked the positive trend in the space following an update on the company’s restructuring efforts.

A trader said the 8½% notes due 2022 fell to 16¼, a loss of 10 points from “almost two weeks ago.”

Another source also pegged the notes at that level, calling it down 6 points.

Dallas-based EXCO said its “consensual restructuring program” was moving along in Phase One, having reduced debt by 28% and gaining covenant flexibility, among other things.

The company said the program would continue, directed by a “streamlined” board of directors.

EXCO said it currently has $250 million of liquidity and that it expects to burn through $10 million per month over the course of the year.

Teck mixed on tender

Away from oil and gas, Teck Resources Ltd., a Canadian diversified mining company, saw its bond trade mixed Tuesday as the market digested news of a tender offer.

A trader called the 4½% notes due 2021 up almost a point at 82 7/8, while the 4¾% notes due 2022 fell nearly a point to 76¼.

Late Monday, Teck said it was tendering for up to $1 billion of notes coming due 2017 through 2019.

The tender offer expires on June 20.

To fund the tender, Teck is currently shopping around a $1 billion two-part senior notes offering, with pricing expected on Thursday.

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