OPEC accord lifts oil sector, California Resources; Valeant Pharma down on asset sale bust

By Colin Hanner

Chicago, Nov. 30 – Bonds in distressed debt-land were flooded with news of the Organization of Petroleum Exporting Countries reaching a supply cut accord on Tuesday, prompting an uptick in oil and oil-related bonds and lifting with it several others whose costs rely on it.

Amid the tug-and-pull speculation that plagued talks for the better parts of two months, OPEC members reached a deal intended to cut the oil supply glut throughout the world.

Among the day’s gainers were California Resources Corp., EP Energy Corp. and MEG Energy Corp., as well as driller Transocean Ltd.

Not feeling the effects of the oil boom was Stone Energy Corp., which continued to reel from Tuesday’s news that its majority shareholder disagreed with the restructuring plan that is set to go into effect on Dec. 9.

Away from oil, Peabody Energy Corp. rebounded after going a “bit sideways” during Tuesday’s trading, and Murray Energy Corp. was down slightly after jumping more than a point a day prior.

A deal to cut its debt by nearly a third fell apart for Valeant Pharmaceuticals International Inc., according to several reports, and the company will instead refocus on reviving its stomach-drug pharmaceutical branch it had intended to sell.

Several of Valeant’s distressed bonds suffered as a result.

Oil rejoices on OPEC accord

In the seesaw of oil supply cut talks that caused volatility in oil futures prices in recent months, certainty finally came in full view.

OPEC members were able to reach a supply cut accord on Wednesday morning, just a day after oil plunged and the deal in question appeared to be falling apart. Countries will cut hundreds of thousands of barrels of production per day individually, amounting to a reduced output by almost 1.2 million barrels per day by the New Year.

West Texas Intermediate crude was up $3.66, or 8.09%, to $48.89 at bond market close on Wednesday, and Brent crude was up $4.09, or 8.82%, to $50.47 at the same time.

California Resources, regularly seen as a name that follows the daily fluctuation of oil futures prices, a trader said, saw a 7-point increase in its 8% notes due 2022, which settled at an 80½ handle.

A market source said the notes traded up 6¼ points.

MEG Energy’s 7% notes due 2024 were up 2 points to 88¾.

Denbury Resources Inc.’s 5% notes due 2022 were up 3¾ points to 82¾, a market source said, and its 4 5/8% notes due 2023 were up 5½ points to 77¾.

Its 6 3/8% notes due 2021 were up 4 points to 87, a market source said.

A trader said EP Energy’s 9 3/8% notes due 2020 were up 4¾ points to 83¾. Its 6 3/8% notes due 2023 were up 4 points to 70.

Linn Energy, LLC’s 7¾% notes due 2021 were up 2¼ points to 33¾, a market source said.

Driller Transocean’s 7½% notes due 2031 were up 4 points to 78, a market source said, and CGG SA, a geoscience company that primarily deals with the oil industry, remained unchanged at 41½ in its 6 7/8% notes due 2022.

Stone continues to falter

On Tuesday, Stone Energy majority shareholder Thomas Satterfield filed a Schedule 13D with the Securities and Exchange Commission, expressing “that the restructuring plan recently announced by [Stone Energy] disproportionately impairs the interests of the issuer’s common shareholders and unfairly advantages other stakeholders, especially the issuer’s board of directors and management,” the release said.

After falling 2½ points in its distressed notes on Tuesday, the Lafayette, La.-based oil and gas corporation continued to fall during Wednesday’s session.

A market source said the 7½% notes due 2022 were down 3½ points to 51. On the week, the notes are down 6 points.

Murray dips, Peabody up

After surging with no apparent coal-related news during Tuesday’s trading, Murray Energy traded in the opposite direction on Wednesday.

Murray Energy’s 11¼% notes due 2021 were down ½ point to 71 3/8, a trader said, nearly erasing any gains it made this week.

After a Tuesday that one trader said was a “bit sideways” for Peabody Energy, it bounced back to a 3¾-point increase in its 6½% notes due 2020, which settled at a 64 handle, a market source said.

Valeant eyed

Within the flurry that has surrounded Canada-based Valeant Pharmaceuticals in recent weeks was reports that it would seek to dispose of Salix Pharmaceuticals, its stomach-drug business, for a reported $10 billion to Takeda Pharmaceuticals Co. in efforts to tack down its $30 billion debt load.

That appears no longer to be the case.

On Wednesday, sources close to the now-defunct deal claim that price and other matters were at the heart of the deal discord, according to The Wall Street Journal.

And, on Tuesday, Valeant announced a primary care sales force for Relistor and Xifaxan, an irritable bowel syndrome drug that is a staple of Salix.

Traders reacted to the realization that the pharmaceutical company would not be reducing its debt load as previously planned, especially in the 5 7/8% notes due 2023, which were down 3 points to 74 7/8, a trader said.

The company’s 6 1/8% notes due 2025 were “actively traded,” a market source said, and were down 2½ points to 74½.

Rounding out its distressed notes were the 5 3/8% notes due 2020, which were down 3 points to 84.

Other movers

After announcing earlier in the week an amendment seeking to exclude certain holders from the ability to consent, waive or amend terms of six notes, iHeartMedia Inc. slowed on Wednesday in several of its notes.

The 10% notes due 2018 were up ½ point to 73, a market source said.

Concordia International Corp.’s 9½% notes due 2022 were up 5/8 point to 44½ on “decent volume trading,” a trader said. The notes were unchanged after the previous session.

The pharmaceutical company’s 7% notes due 2023 were up ½ point to 38½, a market source said.

A market source said Community Health Systems Inc. continued to fall into the day’s session, as the 8% notes due 2018 saw a 1½-point decrease to a 79¼ handle.

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