Chesapeake Energy’s 8% notes rebound; a rise in oil boosts sector; Walter Investments still busy, better

By Stephanie N. Rotondo

Seattle, Aug. 16 – Chesapeake Energy Corp. remained in vogue in the distressed debt market on Tuesday, just one day after the company announced a cash tender offer for 10 series of notes and two series of convertible bonds.

A trader said the name was “very busy” and better. The oil and gas space was trending upward in general, as oil prices gained ground.

Memorial Production Partners LP, for instance, saw its 7 5/8% notes due 2021 adding half a point to end at 50½. A trader said the issue traded in size about 24 times, “pretty heavy volume for them.”

For its part, domestic crude oil prices rose 1.68% to $46.51 a barrel, as the market hopes for a production cut from OPEC. A weaker dollar was also helping the commodity improve.

Meanwhile, Walter Investment Management Corp.’s debt was “still pretty active, though at a less-frenzied pace than last week,” a trader said.

The bonds started to gain steam on Aug. 9 after the company announced a series of strategic transactions. In Tuesday trading, the paper remained on that upward track.

In the coal sector, Murray Energy Corp.’s 11¼% notes due 2021 were seen jumping 8 points to 35¼. The privately-held St. Clairsville, Ohio-based company gave investors access to its second-quarter results after the market closed on Monday. A conference call to discuss said results will be held on Aug. 23.

“I guess the second-quarter numbers are looking up,” a trader said.

Among typical go-to names, Intelsat SA continued to trade firm.

A trader said the 7¾% notes due 2021 ticked up half a point to 28¾. Another market source pegged the 6 5/8% notes due 2022 at 74 bid, also half a point better.

Chesapeake rebounds

Chesapeake Energy’s 8% second-lien notes due 2022 regained the ground lost on Monday when the company announced a cash tender offer, according to a trader.

The trader saw the issue rising nearly a point to 92¼.

At another shop, the 6 5/8% notes due 2020 were pegged at 86 bid, up a point on the day.

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

The 8% notes are not part of the offer.

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 $1.5 billion term loan to fund the offer. The loan was originally slated to be just $1 billion.

Walter goes up

Walter Investment’s 7 7/8% notes due 2021 were modestly better on Tuesday, continuing the company’s climb from last week.

A trader saw the issue closing at 57¾, up half a point.

On Aug. 9, the Tampa-based loan servicing company announced early in the day that it was selling off mortgage servicing rights, as well as nearly all of the assets of Walter Capital Opportunity and its subsidiaries to New Residential Investment.

Combined, the transactions are expected to bring in $514 million.

That news came on the heels of the company’s second-quarter earnings release, which missed analysts’ expectations. Still, the bonds had improved 7 to 8 points on the day.

For the quarter, Walter reported a loss of $232.4 million, or $6.49 per share.

On an adjusted basis, earnings came to 7 cents per share.

Revenue was $187.5 million.

Analysts polled by Zacks Investment Research had expected adjusted EPS of 16 cents on revenue of $255.8 million.

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