Halcon Resources’ debt posts big gains on asset sale news; Frontier paper continues to trend weaker

By Stephanie N. Rotondo

Seattle, July 11 – Halcon Resources Corp. was the nom du jour in the distressed debt market on Tuesday.

“They announced an asset sale and the bonds were rocketing higher,” a trader noted.

In fact, the company’s 6¾% notes due 2025 jumped 14 points on the news, moving over par. Halcon’s equity (NYSE: HK) also saw a sizeable bump with its 51.35% gain.

Meanwhile, Frontier Communications Inc.’s debt was weaker on the day, with one trader calling the bonds down 1 to 1½ points.

That trader saw the 6 7/8% notes due 2025 at 76, the 11% notes due 2025 at 89½ and the 9% notes due 2301 at 76¼.

“The bellwether 11s were trading around 89½, touching new lows,” another trader said. “I guess you could point to the story on the tape about rural telecom names being weaker after Microsoft announced plans to fund projects to bring broadband access to rural areas.

“But it has been a weaker name for awhile in general, so that story was probably just more piling on,” he said.

On Monday, Frontier completed a 1-for-15 reverse stock split, a move that has some wondering if it is the death knell for the company.

Just 18 months ago, Frontier acquired Verizon’s wired voice and data lines in Texas, California and Florida. Since then, the company’s bet on landlines – in a time when nearly everything is going digital – has not proved profitable. That has led to cost-cutting efforts that resulted in service outages and marketing issues.

Hurray for Halcon

A trader said Halcon’s 6¾% notes were the day’s “big mover” following reports of an asset sale.

The trader deemed the debt up 14 points – towards the high point of the day, he noted – at 102¾.

The trader added that the paper had closed Monday’s session around 89 and opened Tuesday around 101.

“So good news for Halcon,” he said.

Another trader also said the paper was 14 points higher, trading around “102-ish.”

The second trader added that the debt was “very busy.”

The Houston-based shale oil company announced on Tuesday that it was selling nearly all of its North Dakota operations to privately held Bruin E&P Partners LLC for $1.4 billion in cash.

The sale is part of the company’s efforts to pare down and focus on its assets in the Permian Basin in Texas.

The sale is expected to close in August.

Elsewhere in the oil and gas space, Noble Energy Inc.’s 7¾% notes due 2024 were called half a point better at 78.

However, California Resources Corp.’s 8% notes due 2022 were seen slipping a shade to 61¾.

For its part, West Texas Intermediate crude improved over 3% after the American Petroleum Institute reported that U.S. crude stockpiles fell more than expected.

API said crude inventories waned 8.1 million barrels last week, while gasoline stocks dropped by about 800,000 barrels.

Analysts polled by Thomson Reuters had predicted a decline of 3.2 million barrels. Those analysts were also forecasting a gain in gasoline and distillate stocks.

The U.S. Energy Information Administration will release its official weekly report on Wednesday.

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