Oil sector’s gains continue post-OPEC news; Caesars debt softens; Community Health sells assets

By Stephanie N. Rotondo

Seattle, Sept. 29 – The distressed bond market was trending upward on Thursday, in line with the broader high-yield market.

The equity markets, however, were not faring as well, stemming gains seen on Wednesday after OPEC announced it had reached a preliminary agreement to cut production.

Still, the OPEC agreement – though not yet formalized – continued to help the distressed space, specifically the energy arena.

“Energy, metals, all that stuff was flying after yesterday’s OPEC stuff,” a trader remarked.

Chesapeake Energy Corp.’s 8% second-lien notes due 2022 were “pretty active,” a trader said, calling the issue up “about 3 points” at 101½.

“They are doing that big convert deal,” the trader noted, referring to the company’s planned $850 million offering of convertible senior notes due 2026.

“I thought somebody was saying they were going to upsize it,” the trader added.

Proceeds from the sale will be used for general corporate purposes, which may include debt repurchases and the repayment of a credit facility and senior notes with near-term maturities.

Another market source reported that pricing on the new deal was reduced to 5.5% to 6%.

At another desk, Chesapeake’s 6 5/8% notes due 2020 were seen up over 2 points at 94 bid.

Elsewhere in the oil and gas space, a trader said California Resources Corp.’s 8% second-lien notes due 2022 were a point higher at 66. However, a second trader deemed the debt “about unchanged.

“They rallied a couple points after the OPEC news yesterday, but it was pretty much flat” on Thursday, the trader said.

Among other oil names, offshore driller Ensco plc’s 5.2% notes due 2025 rose a point to 71½, while EP Energy Corp.’s 9 3/8% notes due 2020 firm 1½ points to 71.

Caesars slips

Away from energy, a trader said Caesars Entertainment Corp. was “the top trader of the day.”

But while most of the market was moving up, the trader said the 10% notes due 2018 linked to the bankrupt operating company weakened a quarter-point to 62¾.

On Tuesday, it was reported that major creditors of the bankrupt unit had agreed to a new and improved restructuring agreement that increased recoveries for second-lien and unsecured creditors.

Under the terms of the new plan, second-lien bondholders will receive 66 cents on the dollar, an increase of about 27 cents from previous proposals.

Unsecured creditors will also see their recoveries rise to 66 cents on the dollar.

First-lien bankers will get about 115 cents on the dollar, a slight reduction to the previous proposals. First-lien noteholders will receive about 109 cents on the dollar, unchanged from before.

The latter group will also get a fixed cash payment of $142 million in exchange for waiving their right to certain excess cash sweeps. That is a reduction of $79 million.

Equity sponsors Apollo Global Management and TPG Capital have also agreed to give up their 14% equity stake. In exchange, creditors agree to drop certain claims levied against them.

Community Health gains

Community Health Systems Inc. bonds traded up as the company said it had reached a deal to divest four rural hospitals.

A trader called the 6 7/8% notes due 2022 a point better at 86.

A second source deemed the 5 1/8% notes due 2021 half a point higher at 98½ bid.

The hospitals will be sold to subsidiaries of Curae Health Inc. A sale amount was not disclosed, but the company did say that the deal was expected to close in the fourth quarter.

The Franklin, Tenn.-based hospital operator has been in the news of late. On Sept. 19, the struggling Franklin, Tenn.-based hospital operator said that it was in talks with financial advisers and that it was exploring its options as high debt levels and operational issues have weighed on the bottom line.

Private equity firm Apollo Global Management was one firm reportedly interested in at least some of the company’s assets.

The bonds have been volatile since that news, but firmed on Wednesday. A trader said it was because the company had indicated it wants to sell itself as a whole, rather than piece by piece.

© 2015 Prospect News.
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