California Resources mixed on tender news; Chesapeake’s potential asset sale drives debt; Comstock up

By Stephanie N. Rotondo

Seattle, Aug. 1 – The distressed oil and gas sector was in focus Monday, due in part to the retreating price of domestic crude.

Crude oil dipped below the $40-mark for the first time in several months – and about 22% from the highs seen in June. While the commodity did recover some ground to close just north of the $40-mark, it was still off considerably – about 3.65% – as lower Saudi Arabian prices and continued production increases pressured an already-oversupplied market.

But oil’s decline was only part of the reason the energy arena was in play, as several credits had fresh news to also help drive its debt.

California Resources Corp. said Monday that it would pay up to $565 million in cash in a tender offer for four series of notes.

The notes will be accepted on a priority basis.

In response to the tender news, the company’s various issues traded in all different ways as they moved to trade at or near their tender price equivalents.

A trader noted that Chesapeake Energy Corp. paper was also trading active, continuing a trend from Friday when it was reported that the company was in talks to sell off its Barnett Shale property.

Though the news initially gave the bonds a boost, the trader remarked that the debt “probably gave back a little bit” as oil prices waned.

Also in the oil and gas space, Comstock Resources Inc. announced earnings on Monday. It also announced an exchange offer for three series of its senior notes.

Though the latest quarterly results were less than ideal – the company said operating cash flow was not enough to cover its debt obligations at current oil prices – the exchange news gave the bonds a small boost.

Away from oil and gas names, a trader said Peabody Energy Corp. debt “continues to move up.”

He saw the unsecured paper trading up 17.

Another trader said the 10% notes due 2022 added “2 and change points, almost 2½ points” to end at 17¾.

However, he said the 6% notes due 2018 dipped a quarter-point to 16½.

California Resources plans tender

California Resources’ bonds traded mixed on Monday after the company announced a tender offer for its four series of notes.

A trader said the 8% notes due 2022 dropped “about 5 points” to the high-50s. He noted that the 5% notes due 2020 moved up 8 to 10 points on the day, “since they were the first priority of the tender issues.”

Another trader said the 8% notes were “very active,” declining 6½ points to 57½.

He noted that the 5½% notes due 2021 were “virtually unchanged” at 48¾.

With the 5% notes at the first priority level, the 5½% notes and 6% notes due 2024 are the second level of priority, with the 8% notes making up the last level. For each $1,000 of notes tendered, holders of the 5% notes will receive $560 in cash, while holders of the 5¼% notes will get $540 and the 6% notes will get $510.

The 8% notes will receive $510 per each $1,000 of notes.

There is an early tender premium of $50 if holders tender by the early deadline of 5 p.m. ET on Aug. 12.

The offer expires 11:29 p.m. ET on Aug. 26.

The Los Angeles-based oil and gas producer is seeking a $700 million five-year first-lien second-out term loan to pay for the offer.

The company held a lender call in the morning to launch the loan that is guided in the mid-to-high 11’s type yield and is non-callable for three years, then with half the coupon in year four, according to a market source.

The debt is a secured financing being done in loan form but with total return characteristics consistent with bonds, the source explained.

Pricing is expected on Friday.

Goldman Sachs Bank USA is leading the deal that will pay down existing term loan and revolver debt.

The company is also seeking an amendment to its existing first-lien secured credit agreement to allow for tender offers for its 5% senior notes due 2020, 5¼% senior notes due 2021, 6% senior notes due 2024 and 8% second-lien secured notes due 2022 that can be purchased with $525 million in cash, reduce revolver commitments to $1.4 billion from $1.6 billion and grant a lien on assets not currently pledged to secure the existing facilities.

Chesapeake busy

Talk of a pending asset sale at Chesapeake Energy has ben moving the Oklahoma City-based company’s bonds around of late.

That trend continued on Monday, though bonds came off their recent highs as oil prices were in retreat.

A trader said the 8% second-lien notes due 2022 were “still trading in the low-90s” after it was reported Friday that Chesapeake was looking to offload its Barnett shale property in Texas.

The trader did remark that the issue was likely off just slightly with oil prices.

Another trader said the 8% notes fell nearly a point to 90 5/8.

Chesapeake is reportedly looking to sell the properties to Saddle Operating, a Dallas-based private company, for $1.3 billion to $1.4 billion. Proceeds will likely be used to reduce debt, as the company has about $1.4 billion of debt that matures or can be put to the company in 2017. Come 2018, another $850 million of debt matures or can be put back to the company.

Comstock launches swap

Comstock Resources posted weak results for its latest quarter, but news of an exchange offer helped its bonds perk up a little in Monday trading.

A trader said the 9½% notes due 2020 gained 1½ points to close at 47¾. Another trader said the debt was “up a touch” trading between 47 and 48.

For the second quarter, Comstock reported a loss per share of $4.05. On an adjusted basis, the loss narrowed to 41 cents per share.

Oil and gas sales declined to $40.7 million from $77.3 million the year before.

The Frisco, Texas-based company also said that it was looking to exchange three series of senior notes – the 9½% notes, the 10% notes due 2020 and the 7¾% notes due 2019 – for new notes and, in the case of the 10% notes, warrants exercisable for common stock.

The early tender date is 5 p.m. ET Aug. 12. The offer expires 11:59 p.m. ET on Aug. 26.

International Ship files Ch. 11

International Shipholding Corp. filed for bankruptcy on Monday as it failed to sell off assets quick enough to satisfy creditors.

The company’s 9% series B cumulative redeemable preferreds (OTCBB: ISHCO) dropped $5.50, or 32.35%, to $11.50 in response to the news. The 9.5% series A cumulative redeemable preferreds (OTCBB: ISHCP) were also much weaker, falling $5.50, or 31.43%, to $12.00.

The Mobile, Ala.-based shipping company has been in the process of selling off certain assets in order to cut down debt.

And while the company said its core businesses have been performing “satisfactorily,” it still needed to shave off some units in order to save up enough money to be in compliance with lender covenants.

Additionally, of the asset sales that have occurred, the company has been unable to get prices high enough to meet its needs.

The company has lined up $16 million of bankruptcy funding.

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.