Distressed market gains amid lightened liquidity; Caesars plans all-stock merger, bonds go up

By Stephanie N. Rotondo

Phoenix, Dec. 22 – There was a firm feel to the distressed debt market on Monday, even as liquidity was scarce.

“It was a quiet one,” a trader said. “And it’s only going to get quieter” as the Christmas and New Year holidays approach.

There was some activity, however, in Caesars Entertainment Corp., as the parent company said it planned to merge with its Caesars Acquisition Co. unit.

The all-stock deal will help the parent company maintain its cash holdings as it prepares to place its Caesars Entertainment Operating Co. unit into bankruptcy by January 15.

Last week, the company said it had reached a deal with senior bondholders approving the restructuring plan that would place the subsidiary into Chapter 11 protections. Upon emergence, the opco will be a two-pronged real estate investment trust, with one side owning the properties and one side managing them.

A trader said the 10% second-lien notes due 2018 were up a touch on the news, placing the issue at 16¾. But another trader called the issue “pretty much in line” with where it had been, seeing the notes in a 16½ to 17 zip code.

The second trader also saw the 9% notes due 2020 closing up 2 to 3 points at 77½.

Most energy names rally

Away from Caesars, oil and gas names continued to trade around, but the day’s generally positive tone helped most credits gain ground – even as oil prices declined yet again.

A trader said SandRidge Energy LLC’s 7½% notes due 2023 rose half a point to 63½, while the 7½% notes due 2021 gained 1½ points, closing around 66.

The 8¾% notes due 2020 improved a point to 67, the trader said.

At another desk, the 2021 paper was pegged at 65¾ bid, up 1¼ points.

Linn Energy LLC was also climbing.

A trader saw the 6¼% notes due 2021 closing a point higher at 80½.

Another source deemed the 7¾% notes due 2021 up a deuce at 83 bid.

However, not every E&P name was stronger.

A market source said Goodrich Petroleum Corp.’s 9.75% series D cumulative preferreds (NYSE: GDPPD) were “trading really badly now.

“People are anticipating that they will go under,” he said, noting that the company is still paying its dividends.

The issue finished the session at $9.05, off 75 cents, or 7.65%.

Meanwhile, a bond trader saw the company’s 8 7/8% notes due 2019 rising a point – albeit in a single trade – to 50½.

Goodrich is one of many oil and gas exploration and production companies that have hit hard times as oil prices have declined. Earlier this month, the company said it was looking to unload its South Texas shale assets. In that same announcement, capital expenditures for the new year were trimmed to $150 million to $200 million, down from the $325 million to $375 million projected for 2014.

The price of oil remained weak on Monday.

West Texas Intermediate crude fell $1.75, or 3.06%, to $55.38 per barrel. Brent crude dropped $1.30, or 2.12%, to $60.08 per barrel.

Iron prices cut

Cliffs Natural Resources Inc.’s bonds were mostly down on the day as Australia cut its iron ore price estimate for 2015.

One trader said the 4.8% notes due 2020 fell 2 points to 55¼. However, he saw the 4 7/8% notes due 2021 inching up some to end at 54½.

Another trader said the debt was “a little lower,” placing the 6¼% notes due 2040 in a 53 to 54 context, off “another point or so, almost 2 points.

“That stuff just keeps leaking,” he said.

Australia’s Department of Industry lowered its average iron ore price target to $63 per metric ton, down from $94 per ton forecast in September.

The country said the move came amid increased output and lowered demand, especially from China.

© 2015 Prospect News.
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