Chesapeake Energy begins tender offer; California Resources firms; Claire’s trades mixed on swap news

By Stephanie N. Rotondo

Seattle, Aug. 15 – Distressed bonds were moving about in Monday trading as investors reacted to fresh – or at least recent – news.

Chesapeake Energy Corp.’s debt traded mixed on the day as the company said it had launched a cash tender offer for 10 series of notes, as well as two series of convertible bonds.

The Oklahoma City-based oil and gas producer also launched a $1 billion five-year first-lien last-out term loan on Monday, the proceeds of which will be used to fund the tender.

Also in the oil and gas space, Los Angeles-based California Resources Corp. gave the early results of its own cash tender offer, which expires on Aug. 26. Already the offer is oversubscribed, leaving the 8% second-lien notes due 2022 – the third priority level in the tender – out in the cold.

Still, with a majority of the company’s other debt being taken out, the 8% notes ticked higher in Monday trading.

Meanwhile, Claire’s Stores Inc. said late Friday that it was doing a debt swap of its own, exchanging notes due 2017, 2019 and 2020 for new term loans.

Come Monday, the Pembroke Pines, Fla.-based retailer’s bonds were mixed.

Away from tender-inspired moves, Avaya Inc.’s 7% notes due 2019 were slightly firmer, according to a trader.

The trader pegged the issue at 79½.

Intelsat SA bonds were also trending upward, as a trader saw both the 7¼% notes due 2019 and 2020 ticking up half a point to 79 and 75½, respectively.

At another desk, the 6 5/8% notes due 2022 were seen a point better at 73½ bid.

Chesapeake launches tender

Chesapeake Energy announced a cash tender offer on Monday for 10 series of notes and two series of convertible bonds.

The company plans to use proceeds from a new $1 billion term loan to fund the offer.

A total of $650 million of notes will be accepted on a priority basis. Another $275 million of the convertibles will be taken in.

On the news, a trader said the 8% second-lien notes due 2022 were “very active,” though that issue is not part of the tender – which might explain why the debt dropped nearly a point to 91¼.

But another market source said the 6 5/8% notes due 2020 – part of the third priority class – inched up almost 2 points to 85.

Noteholders will receive par plus accrued interest for the validly tendered and accepted debt. Holders of the convertible paper will get between $920 and par for each $1,000 of convertibles tendered.

The tender offer expires at 11:59 p.m. ET on Sept 12.

The offer is contingent upon a minimum amount of notes being tendered.

Chesapeake plans to use proceeds from a new $1 billion term loan to fund the offer.

California Resources rises

California Resources released the early results of its oversubscribed tender offer on Monday.

Under the $750 million cash offer, over 50% of the 5% notes due 2020 – the only level one priority issue – were accepted as of the Aug. 12 early deadline. Holders who participated will receive $560 per each $1,000 of notes.

Nearly 90% of each of the second priority notes – the 5½% notes due 2021 and 6% notes due 2024 – were accepted. Holders of those issues will receive $540 for the 5½% notes and $510 for the 6% notes.

Over half of the 8% second-lien notes due 2022 were also tendered, but none were accepted, given their level-three priority.

But with less debt layered on top of them, the 8% notes were gaining ground in Monday trading.

A trader called the bonds up a deuce at 64¾.

Claire’s mixed on swap news

Claire’s Stores’ 9% notes due 2019 dropped over 4 points on Monday, while its 7¾% notes due 2020 added about 10, according to a trader.

The moves came after the company said late Friday that it was swapping out all of its outstanding $450 million of 8 7/8% senior secured second lien notes due 2019, its $320 million of 7¾% senior notes and its $26.5 million of 10½% senior subordinated notes due 2017 not held by Claire’s Inc.

Holders who participate will receive new 9% term loans for their debt.

The retreat of the 9% notes was likely due to the fact that the issue was not part of the exchange.

A trader pegged the paper at 57½.

The 7¾% notes meantime rose to 15. The trader noted that the last trades in size occurred in early July around 5.

“It never trades anymore,” he said.

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