Crude oil prices jump, energy sector follows; Puerto Rico debt dims; Valeant paper continues to gain

By Stephanie N. Rotondo

Seattle, April 6 – Distressed bonds ended with a mostly firm tone on Wednesday.

The energy sector in particular was seen finishing higher as oil prices jumped over 5% for the day.

A trader said Whiting Petroleum Corp.’s 5¾% notes due 2021 bounced up almost 3 points to 64¼.

However, he also noted that the company’s 6½% notes due 2018 fell off over 1½ points to 66 5/8.

Oasis Petroleum Inc.’s 6 7/8% notes due 2022 were meantime better by “a point and change,” a trader said, seeing the issue ending at 74 1/8.

Sanchez Energy Corp. was another gainer, though its 6 1/8% notes due 2023 ticked up just a quarter-point to 51¾. MEG Energy Corp.’s 6 3/8% notes due 2023 were up a like amount at 59.

Preferred units of MLPs were also gaining ground in midweek trading.

In fact, Legacy Reserves LP and Breitburn Energy Partners LP had some of the largest percentage gains on the day.

Legacy’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) added 28 cents, or 13.21%, to close at $2.40. The 8% series A fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) improved 23 cents, or 9.96%, to $2.54.

Breitburn’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) meantime put on 22 cents, or 3.93%, to end at $5.82.

For its part, oil prices surged after the U.S. Energy Information Administration reported that crude inventories fell by 4.9 million barrels last week.

Analysts polled by Reuters had expected a build of 3.2 million barrels.

But while the energy space – as well as the broader space – was strong for the day, traders remarked that overall liquidity continued to be thin.

The day’s biggest trader in all of the high-yield space was Intelsat SA’s $1.25 billion of 8% notes due 2024, a deal priced March 21.

One trader said the issue added over a point to close at 105, a level echoed at another desk.

“But good God, away from that, what in the world was trading?” the second trader said.

Puerto Rico G.O. bonds weak

A trader said the Commonwealth of Puerto Rico’s 8% series 2014A general obligation bonds due 2035 were “down a couple more points.”

He pegged the issue at 64, adding that the debt was down “a dozen points so far this week.”

“There’s a lot of headlines coming out with the debt moratorium,” he noted.

On Tuesday, the island’s governor proposed legislation that would halt all debt payments. The bill was then passed by the Puerto Rican Senate and is making its way to the House of Representatives.

Bondholder groups, however, were not pleased with the deal.

“It is no coincidence that the governor has abruptly sought overnight adoption of debt moratorium legislation at the very moment large general obligation bondholders were arriving on the island to pursue a consensual restructuring deal with Puerto Rico’s political leaders, other than the governor,” Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton and Garrison LLP said in a news release issued Tuesday.

“The governor has spent the last nine months rebuffing all overtures by the G.O. holders.

“In fact, the consensual deal that is being proposed by G.O. holders would give Puerto Rico additional liquidity by, among other things, deferring substantial principal payments.

“Most importantly, this consensual deal avoids a July 1 default on Constitutional debt.”

The bondholder group said in a separate news release that numerous investors, including mutual funds, holding $5 billion of Puerto Rico’s G.O. bonds have agreed upon the terms of a joint restructuring proposal and that more G.O. bondholders are expected to join in this proposal in the very near future.

“Governor Garcia Padilla has made clear that he will pursue any means necessary to follow his agenda, regardless of legality, and in doing so has all but destroyed the credibility of the commonwealth,” Main Street Bondholders member Elias Gutierrez said in another release out Tuesday.

Fellow member Teresa Garcia said in the release that the legislation “will crush any negotiations that may have been ongoing in good faith between Puerto Rico and bondholders.

“This bill makes finding a consensual solution essentially impossible and wrongly directs a crisis of the governor’s own making at regular bondholders all over Puerto Rico.”

Valeant on the rise

Valeant Pharmaceuticals International Inc.’s term loans were stronger in the secondary market on Wednesday as the overall market felt a little better and positive sentiment from recent company news carried over from Tuesday, according to traders.

The term loans E and F were quoted at 96 bid, 96½ offered, up from 95 5/8 bid, 96 3/8 offered, the term loans C and D were quoted at 96¼ bid, 97 offered, up from 95 5/8 bid, 96 3/8 offered, and the term loan A3 was quoted at 96½ bid, 97½ offered, up from 95½ bid, 97 offered, one trader remarked.

Meanwhile, a second trader had the term loans E and F quoted at 96¼ bid, 97 offered, up from 95¾ bid, 96½ offered on Tuesday.

On Monday, the term loans E and F were quoted at 94 bid, 95 offered, the term loans C and D were quoted at 94¾ bid, 95¾ offered, and the term loan A3 was quoted at 95¼ bid, 96¼ offered.

The company’s bonds were also titling up, according to a trader.

The trader saw the 5 7/8% notes due 2023 at 80½, a gain of nearly a point on the day. The 6 1/8% notes due 2025 were a shade higher at 79 3/8.

Valeant’s debt levels– particularly its term loans – began rising on Tuesday as the company went out with changes to its amendment proposal, including the addition of a leverage-based pricing grid and requirements for more deleveraging than originally planned.

The company is seeking the amendment to extend the deadline for filing its form 10-K to May 31, to extend the deadline for filing its form 10-Q for the quarter ending March 31 to July 31 and to waive the cross-default to its indentures that arose when the 10-K was not filed on March 15.

Lenders are being offered a 50-bps amendment fee.

Also helping the debt this week was the company’s announcement on Tuesday that the review of various Philidor and related accounting matters has been completed with no further restatements required beyond those previously disclosed.

Valeant is a Laval, Quebec-based specialty pharmaceutical company.

Sara Rosenberg and Caroline Salls contributed to this article.

© 2015 Prospect News.
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