Outerwall bonds pop on private equity takeover; W&T Offshore debt trades up post-exchange news

By Stephanie N. Rotondo

Seattle, July 25 – Trading in the distressed debt arena was once again overshadowed by the overall high-yield space on Monday, but not without good reason.

News of a $1.375 billion tender offer for Post Holdings Inc.’s 7 3/8% senior notes due 2022 was turning heads, as was the company’s new $1.75 billion issue of 5% 10-year notes, a trader said.

Also getting investors’ attention was the latest earnings release from Sprint Nextel Corp., which was “better than expected,” a trader commented.

Among more distressed-leaning names, Outerwall Inc. was the day’s “big news,” according to a trader. The owner and operator of RedBox and Coinstar kiosks announced early Monday that it was being taken private by Apollo Global Management in a deal valued at $1.6 billion.

“The bonds were way up,” a trader said. He saw the 7 5/8% notes due 2021 trade as high as 102 before settling back in to around 101. That was up from 87 previously.

In March, the company said it was exploring strategic alternatives after seeing revenues decline for three years straight. Under the terms of the buyout, shareholders will receive $52 in cash, representing a 51% increase over the share price back in March.

W&T bucks sector’s trend

There was some movement in the distressed energy space, as domestic crude oil prices slumped yet again.

“Oil is languishing around $43 a barrel,” a trader pointed out.

The price of the commodity continues to be weighed on by concerns of global oversupply and waning demand.

W&T Offshore Inc.’s 8½% notes due 2019 were one of a few oil and gas names that actually managed to gain ground for the day, as the Houston-based oil and gas company launched an exchange offer for the debt.

A trader said the paper improved over ½ points to 30 5/8.

W&T is swapping the $900 million in bonds for a combination of stock and pay-in-kind notes. For each $1,000 of the 8½% notes tendered by the early deadline, holders will receive 69 shares, $225 of new senior second-lien PIK toggle notes due 2020 and $200 of new senior PIK toggle notes due 2021.

Those tendering after the early deadline will receive $25 less of the second-lien notes.

The early deadline is 5 p.m. ET on Aug. 8. The offer expires at 5 p.m. ET on Aug. 29.

Elsewhere in the sector, a trader said California Resources Corp.’s 8% second-lien notes due 2022 dropped 2¼ points to close at 66¾.

The trader also saw Whiting Petroleum Corp.’s 5¾% notes due 2021 falling 1¼ points to 88. Denbury Resources Inc.’s 6 3/8% notes due 2021 were off a similar amount, ending at 72¼.

Stone Energy Corp.’s 7½% notes due 2022 were also weaker, slipping 1½ points to 51½.

iHeart, Caesars gain

In other distressed names, a trader said iHeart Communications Inc.’s 14% notes due 2021 ticked up half a point to 39, while the 9% notes due 2022 increased 1¼ points to 74½.

Caesars Entertainment Corp.’s 10% notes due 2018 – an issue that rarely trades in size – improved half a point to 41¾.

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