Nabors among distressed oil, gas bond gainers; Peabody paper improves; AMC climbs

By Cristal Cody

Tupelo, Miss., Jan. 6 – Distressed oil and gas bonds continued to rise in secondary trading on Wednesday following a bump in the prior session as oil prices soared on production cuts from Saudi Arabia.

Houston-based oil and gas drilling contractor Nabors Industries Ltd.’s senior notes (Caa1/CCC-) were stronger following the rise in energy names on Tuesday, a source said.

Nabors’ 7¼% notes due 2026 jumped nearly 3½ points on the day to 74 bid.

The company’s 7½% senior notes due 2028 climbed another 1.7 points to 71½ bid following a 2¼ point jump in the prior session.

North Sea Brent crude oil futures rose 1.06% to $54.17 a barrel on Wednesday.

News on Wednesday centered on supporters of president Donald Trump pushing past police and storming the U.S. Capitol. One person was reported dead. The breach occurred as electoral votes certifying Joe Biden’s presidential election win were underway.

Democrats cinched control of the Senate with victories in both Georgia races held Tuesday.

Stocks were mixed with the Dow Jones industrial average up 1.44% on the day, while the Nasdaq dipped 0.61%.

The iShares iBoxx High Yield Corporate Bond ETF dropped 16 cents, or 0.18%, to 86.99 after recovering 3 cents in the prior session from Monday’s 18 cent decline.

The S&P U.S. High Yield Corporate Distressed Bond index closed Tuesday up 0.66% with a month- and year-to-date total return of 0.92%, according to the latest data.

Peabody notes rise

Coal producer Peabody Energy Corp.’s 6 3/8% senior secured notes due 2025 (Caa1/CCC-) gained 1½ points to 56½ bid, a source said on Wednesday.

On Monday, the 6 3/8% notes had softened 1½ points to 54¾ bid.

Peabody Energy has an early tender deadline on Friday to exchange the $459 million outstanding of its 6% senior secured notes due 2022. The company is offering to exchange the notes for a ratable share of $194 million of new 10% senior secured notes due 2024, a ratable share of $9.42 million of cash and new 8½% senior secured notes due 2024.

The arrangement has some key concerns, according to credit research firm Covenant Review on Wednesday.

For example, the restricted payments “covenant contains a bespoke provision permitting purchase of any 2022 notes remaining in existence after giving effect to the exchange offer of no less than $25 million,” the firm said in a report.

In addition, secured tack-on notes may be issued in exchange for any 2022 notes remaining in existence after giving effect to the exchange offer at par.

Also, within 15 days after the issue date, the company must make an offer to repurchase $22.5 million of the notes at an 80% purchase price, without premium or make-whole, Covenant Review said.

Chesapeake steady

Meanwhile, Chesapeake Energy Corp.’s 8% notes due 2027 traded mostly flat at 5¼ bid in light volume on Wednesday after heavy trading in the previous session, a market source said.

The notes were steady Tuesday from where the issue opened the year in thin trading on Monday at 5¼ bid and better than where it finished December at 4.6 bid.

Chesapeake Energy filed Chapter 11 bankruptcy on June 28, 2020.

The company’s bonds were still trading with a 50 handle in February 2020 before the pandemic started but fell off a cliff by March 2020 when they were trading in the 12½ bid area. The issue last saw a high of 8¼ bid in June and traded as low as 3 bid in July, Trace data shows.

Chesapeake said in its bankruptcy announcement that it entered into a restructuring support agreement with all of the lenders under its revolving credit facility and holders of approximately 87% of the obligations under its term loan agreement, approximately 60% of its senior secured second-lien notes due 2025 and approximately 27% of its senior unsecured notes. Chesapeake plans to reorganize to eliminate about $7 billion of debt.

Travel, entertainment mixed

In other distressed trading, car rental operator Hertz Corp.’s notes declined, a source said Wednesday.

The company’s 5½% senior notes due 2024 slid 2¾ points to 51¼ bid.

On Monday, the 5½% notes had gained ¼ point from before Christmas to 53½ bid.

Meanwhile, beleaguered theater owner AMC Entertainment Holdings, Inc.’s distressed bonds were among the gainers on Wednesday, a source said.

AMC’s 10½% first-lien secured notes due 2025 (Caa2/CCC) closed up 3 points at 76½ bid.

In addition, the company’s 12% notes due 2026 (Ca/C) rose 2¾ points to 27 bid during the session.

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