Energy bonds gain on oil bounce; Memorial Production down on extension; Intelsat cools; Valeant up

By Colin Hanner

Chicago, Dec. 8 – Distressed energy bonds found their footing again on Thursday, after two sessions of depressing oil prices that had brought down most related notes.

After flirting with sub-$50 per barrel prices on Wednesday, oil futures bounced up several points. In the ongoing talks of supply cuts with non-Organization of Petroleum Exporting Countries – and the speculation that swirls around possible scenarios – Russia will discuss its compliance with production cuts at a supply cut meeting this weekend after saying the meeting could be moved.

Denbury Resources Inc., CGG SA and EP Energy Corp. were among the day’s gainers, and GenOn Energy, Inc., one of the day’s biggest decliners on Wednesday, remained unchanged.

Oil and natural gas developer and explorer Memorial Production Partners LP obtained an extension through the middle of the month with holders of two of its distressed notes, on the heels of the company’s decision to not make an interest payment on one set of the notes.

Intelsat SA took a reprieve from the nearly week-long stretch of gains after it announced the details on two of the three notes included in an exchange offer reached on Monday.

After going against the tide of pharmaceutical movers on Wednesday, Valent Pharmaceuticals International Inc. continued to see gains during Thursday’s session.

Oil on the up

After a Tuesday-Wednesday stretch of declining oil prices – and many energy bonds trending down with them – oil rebounded to levels comfortably above $50 per barrel.

On Saturday, non-OPEC members will meet to discuss cuts that are seen as necessary to further the progress last week’s OPEC talks seemed to have had on the market.

West Texas Intermediate crude was up $1.05, or 2.11%, to $50.82, while Brent crude was up 85 cents, or 1.60%, to $53.85.

Denbury Resources’ 6 3/8% notes due 2021 were up nearly 1 point to 91, a market source said. Its 5½% notes due 2022 saw little volume but traded up 1½ points to 88 5/8.

Geophysical service company CGG SA was up ¼ point in its 6½% notes due 2021, which settled with a 43½ handle.

EP Energy’s 6 3/8% notes due 2023 were up ¼ point to 81, a market source said.

GenOn Energy Corp.’s 9 7/8% notes due 2020 were unchanged at 66¾.

One of the biggest movers in the E&P sector was Noble Holdings International Ltd., whose 6.05% notes due 2041 were up 4 points to 67¼, a market source said.

Its 8.2% notes due 2045 were up 3 points to 78½.

A market source said Noble Holdings’ 3.95% notes due 2022 were one of the day’s biggest gainers on Wednesday with a 3-point upswing, and they continued to roll up 2 points to 86 on Thursday.

Oil and gas service company Weatherford International Ltd. saw a 1½-point uptick in its 7% notes due 2038.

Memorial down on extension

On Thursday, Memorial Production Partners obtained an extension through Dec. 16 of its forbearance agreements with holders of 51.7% of its 7 5/8% senior notes due 2021 and 69% of its 6 7/8% senior notes due 2022, according to a company news release.

Specifically, the noteholders agreed to forbear exercising any of its rights related to Memorial’s election to not make a $24.6 million interest payment due on the 2021 notes.

The 7 5/8% notes due 2021 in question were down 4 points to 40, a market source said.

The company said it is in discussions with its lenders and a steering committee of its noteholders regarding potential strategic alternatives to strengthen its balance sheet and improve its capital structure.

Intelsat cools after hot streak

On Monday, Intelsat SA announced it had agreed to exchange new senior notes and cash for three sets of notes, causing the satellite company’s distressed bonds to gain across the board.

Details of the exchange offer came to light on Thursday, as the company announced exchanges in which it is offering up to $421 million of new 12½% senior notes issued by Intelsat Connect Finance SA – which was created for the exchange offer – and up to $150 million of cash for the 6¾% senior notes due 2018 and the 7¾% notes due 2021 issued by Intelsat (Luxembourg) SA.

As part of the deal, Intelsat is offering $350 of the 12½% notes and $600 cash per $1,000 principal amount for up to $217 million of the $475 million of Intelsat Luxembourg 6¾% notes, excluding $25 million of the notes held by Intelsat Luxembourg.

For the Luxembourg 7¾% notes, $550 of the 12½% notes and $30 cash per $1,000 principal amount will be offered for up to $624 million of the $2 billion of the notes.

A market source said the 7¾% notes were down nearly 1 point to 34½, after trading in the “35¼-35½ area” on Wednesday.

The 6¾% notes were down 1½ points to 81, a market source said.

Intelsat Jackson Holdings SA’s 5½% notes due 2023 were unchanged at 68¾, though they traded as high as 69 during intraday trading, a market source said.

The market source said that the 7¼% notes due 2019 were unchanged at 83, although they fluctuated ¼ point up and down from that handle.

In healthcare

After comments from president-elect Donald Trump on Wednesday that led the pharmaceutical sector downward, Valent Pharmaceuticals emerged as a gainer and continued that trend during Thursday’s session, particularly in its 7½% notes due 2021, which were up ¾ point to 86.

Community Health Systems Inc. 8% notes due 2019 up ¼ point to 87, a market source said.

Caroline Salls contributed to this review.

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