Energy bonds mixed in distressed trading; Transocean, Peabody active; Chesapeake emerges

By Cristal Cody

Tupelo, Miss., Feb. 9 – Chesapeake Energy Corp.’s bonds saw light trading on Tuesday ahead of the company’s announcement after the markets closed that it completed its restructuring process and emerged from Chapter 11 bankruptcy.

The energy company’s 8% senior notes due 2027 traded at 6 bid in thin volume, a market source said.

Chesapeake Energy was in the primary market on Feb. 5 with a $1 billion two-part sale of senior notes.

The company said under the restructuring plan, about $7.8 billion of debt has been equitized and the company’s preferred and common equity interests have been canceled. The company’s new shares will begin trading on the Nasdaq on Wednesday under the ticker “CHK.”

As of Tuesday, the company has $271 million of senior secured debt and $1 billion of total unsecured debt.

Chesapeake said its average daily production for the 2020 fourth quarter was approximately 435,000 barrels of oil equivalent, and it projects its full-year 2021 average daily production to be approximately 427,000 barrels of oil equivalent.

North Sea Brent crude oil futures for April deliveries settled 53 cents higher at $61.09 a barrel.

West Texas intermediate crude oil for March deliveries rose 39 cents to $58.36 a barrel.

Market tone was mixed over the day but trending softer.

The iShares iBoxx High Yield Corporate Bond ETF fell 16 cents, or 0.18%, to $87.62.

The S&P U.S. High Yield Corporate Distressed Bond index has year-to-date total returns of 10.17% after closing Monday up 0.43%.

Fitch Ratings said in a news release on Tuesday that the oil and gas sector still accounts for the largest share by debt of potential fallen angels based on ratings, outlooks and sector exposure to Covid-19.

“The sectors most exposed to the new restrictions include transportation; aerospace and defense; gaming, lodging and leisure; and non-food retail,” Fitch said. “The risk increases if these restrictions do not end by 2Q20 (as we currently expect) and last into 3Q20.”

Offshore driller Transocean Inc.’s 7½% notes due 2026 gained ½ point to 57 in trading Tuesday, a market source said.

The company’s 8% senior notes due 2027 (Ca/CCC) improved ¼ point to 56¾ bid over the day.

Oil and gas exploration company Moss Creek Resources Holdings Inc.’s 7½% senior notes due 2026 (Caa2/B-) are continuing to trade better this week after heavy volume last week, a source said.

The notes were last seen Monday in strong supply at 86 bid, better than where the notes traded Friday at 85 3/8 bid and up from 82¼ bid in the same period a week ago. The notes traded Tuesday in light volume at 85½ bid.

Coal producer Peabody Energy Corp.’s 6 3/8% senior secured notes due 2025 (Caa1/CCC-) traded up ¼ point to 55½ bid on Tuesday after last being seen in the secondary market on Friday, a source said.

The issue has softened from 59 bid at the start of February.

Peabody Energy completed a distressed exchange of its 6% secured notes due 2022 in January for new 10% secured notes due 2024 and 8½% secured notes due 2024.

Bankrupt bonds active

Frontier Communications Corp.’s 7 5/8% notes due 2024 softened less than ½ point over the past two sessions to 53 7/8 bid in strong trading on Tuesday, according to a market source.

Frontier expects to emerge from Chapter 11 bankruptcy early in 2021.

Frontier announced in January that it received approval from the Federal Communications Commission for its restructuring.

The U.S. Bankruptcy Court for the Southern District of New York confirmed the company’s plan of reorganization in August.

Bankrupt car rental company Hertz Corp.’s 5½% notes due 2024 traded at 69 bid over the day in heavy volume, up from 64¼ bid in the same session a week ago, according to a market source.

Hertz filed for Chapter 11 bankruptcy in May 2020.

In January, Hertz received bankruptcy court approval to dispose of at least 121,510 lease vehicles in a master lease agreement in exchange for paying noteholders $756 million in nine equal payments of $84 million, beginning this month and concluding in September.

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