Midstates debt weakens as company discloses asset sale; weak oil prices pressure energy names

By Stephanie N. Rotondo

Phoenix, March 10 – It was a mixed day in the distressed debt market on Tuesday, according to traders.

Midstates Petroleum Co. Inc.’s debt remained under pressure, despite the company announcing an asset sale. The bonds declined Monday after the company unveiled a succession plan for its chief executive officer and certain board members.

Elsewhere in the energy space, a trader said some of Quicksilver Resources Inc.’s issues were “practically worthless.”

He saw the 7 1/8% notes due 2016 at 1½, unchanged on the day. However, the 9 1/8% notes due 2019 rebounded by 2½ points to 16, he said.

The 11% notes due 2021 also ended higher, rising a deuce to 16½.

In Peabody Energy Corp. bonds, the 6¼% notes due 2021 were deemed 2 points lower at 72¼, according to a trader. The 6% notes due 2018 finished off 1¾ points at 87¼, while the 6½% notes due 2020 lost over 1½ points to close at 77 1/8.

For its part, oil prices were seen weakening in Tuesday trading. The decline was attributed to a stronger dollar.

West Texas Intermediate crude dropped $1.36, or 2.72%, to $48.64 a barrel. Brent crude weakened $1.96, or 3.35%, to $56.57.

Meanwhile, Hexion Inc. paper jumped after the company released its fourth-quarter and year-end results. The specialty polymer manufacturer reported that its EBITDA had improved, both in the quarter and in the year.

Midstates selling assets

Midstates Petroleum said Tuesday it was selling its Dequincy area assets for $44 million.

The sale is “another step forward in our overall strategic plan to add liquidity and focus on our premier position in the Mid-Continent,” said Mark E. Eck, chief operating officer, in a prepared statement.

The company plans to use proceeds to pay down its revolving credit facility.

However, investors weren’t all that jazzed about the news.

A trader said the 10¾% notes due 2020 fell a point to 61.

The issue was down 2 to 3 points on Monday after the Tulsa, Okla.-based announced a succession plan for its CEO and certain board members.

In a press release published Monday, the oil and gas company said that Frederic (Jake) F. Brace was joining the board of directors and was being hired as an employee, effective immediately. Furthermore, Dr. Peter J. Hill, interim president and CEO, resigned from the board – effective immediately – and will be leaving his current position once the company releases its 10-K.

Once Hill exits his post, Brace will be appointed as interim president and CEO.

Last week, Midstates said it was delaying filing its fourth-quarter and year-end results, stating that more time was needed to compile the figures.

Hexion EBITDA improves

Hexion debt jumped after the company reported its latest quarterly results.

A trader said the 8 7/8% notes due 2018 gained 3 points to 88½ “on a lot of trades.” The 9% notes due 2020 meantime popped 6½ points to 67, while the 6 5/8% notes due 2020 ended up 1½ points at 96.

For the fourth quarter, the Columbus, Ohio-based company saw net sales of $1.16 billion, down 3% year over year.

A stronger dollar was blamed for the decline.

However, segment EBITDA was $88 million, up 11% from the previous year. A gain the company’s North American forest products and specialty epoxy units was driving the move, the company said in its earnings press release.

For all of 2014, net sales rose 5% to $5.14 billion. Segment EBITDA increased 7% to $450 million.

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