Distressed oil and gas names strengthen with oil prices; Concordia trades busy, soft as new deal prices

By Stephanie N. Rotondo

Seattle, Oct. 6 – The distressed debt market had a firm tone Thursday, due in part to continued gains in domestic crude oil.

Oil prices broke above the $50 mark as U.S. stockpiles continued to decline and it was reported that another informal OPEC meeting was planned at an energy summit in Istanbul.

This time, Russia’s energy minister is expected to join in. Though no official agreement is expected, a potential production cut is the topic on the table.

Still, the news has helped the struggling oil and gas sector’s bonds improve.

California Resources Corp.’s 8% second-lien notes due 2022, for instance, were up nearly 4 points, a trader said, seeing the paper at 73.

Another market source called the issue 5 points better at 73¼.

Denbury Resources Inc.’s 6 3/8% notes due 2021 were also better, rising a deuce to 84.

Another gainer was Chesapeake Energy Corp., as its 6 5/8% notes due 2020 finished half a point higher at 95 bid.

Among offshore drillers, Ensco plc’s 5.2% notes due 2025 firmed a point to 74½ and W&T Offshore Inc.’s 8½% notes due 2019 added over half a point to close at 40 7/8.

In the broader energy space, Peabody Energy Corp. bonds “took a breather” after running up over 10 points in the last week, spurred by improving coal prices.

A trader said the 10% notes due 2022 came “off a little bit from the peaks,” trading in a 54 to 55 context.

He also placed the unsecured notes “around 36.”

A second trader pegged the 10% notes at 54½, down “almost a point.”

Concordia drops on new issue

But while the oil and gas space’s gains helped prop up the distressed space, the notable name of the day was Concordia International Corp.

The Canadian drugmaker saw its bonds taking a dip in the wake of the company’s new deal.

A trader said the 9½% notes due 2022 lost 2 points to close at 74¼, while the 7% notes due 2023 dropped over 2 points to 68½.

Another trader placed the 9½% notes in the mid-70s. He also said there was a “bunch of trading” in the 7% notes, which fell to 69 from a 70 to 71 context previously.

“They were off a little bit,” the trader said.

The company priced $350 million of 9% first-lien senior secured notes due 2022 on Thursday, the proceeds of which it plans to use for general corporate purposes. That may include cash management requirements, funding the launch of pipeline products and funding small regional product acquisitions.

The deal came at the tight end of the 9% to 9¼% price talk.

Though the established debt did not perform well, the new issue did.

A trader saw the new notes in a 103 to 104 zip code.

“It traded well,” he said. “Not a lot, but it traded well on the break.”

On Monday, it was reported that the pharmaceutical company was in talks for a potential equity stake. The discussions are being considered as an alternative, as talks regarding a leveraged buyout have not gotten anywhere.

In September, Concordia bonds were put on the radar on word the United Kingdom was proposing legislation that would curb hefty price increases on certain generic drugs. That resulted in a series of losses for the name. The paper was further pressured by a report by Goldman Sachs that opined the U.K. legislation – and whatever fallout Concordia might face because of it – would make the company a less attractive buyout target.

© 2015 Prospect News.
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