Bonds of the Gulf of Mexico explorer ATP Oil & Gas Corp. slumped by the most since they were issued, following the resignation of the company’s new Chief Executive Officer Matt McCarroll a week after being named to the position.
ATP’s $1.5 billion of 11.875 percent notes maturing in May 2015 dropped 11.5 cents to 46.4 cents on the dollar to yield 48 percent at 4:54 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. There were more than 190 trades by dealers of $1 million or more in ATP’s bonds today, Trace data show.
McCarroll resigned and canceled his share purchases from the company after failing to reach an employment agreement, according to a statement yesterday from Houston-based ATP. He was named to the position June 1. The drop in bond prices was the biggest fall since the securities started trading in January 2011 and the lowest price since the debt was issued.
“Things must have been much worse than Matt was led to believe,” said Ravi Kamath, a Houston-based debt analyst at Global Hunter Securities LLC, an investment bank that focuses on energy, mining and health-care sectors. “The resignation and the fact that he pulled his investment doesn’t help investors.”
McCarroll, who led Dynamic Offshore until it was acquired by SandRidge Energy Inc. for $1.3 billion last year, was named as the new CEO last week. He had purchased 1 million shares of ATP at market price, which showed his “commitment” to the company, ATP said in a June 1 statement.
“It’s a clear negative that someone respected like him got spooked and quit before damaging his reputation,” Kamath said.
The 11.875 percent bonds are rated Caa2 by Moody’s Investors Service, eight levels below investment grade, and CCC-by Standard & Poor’s. Isabel Plume, a spokeswoman for ATP, didn’t return a call seeking comment.
“The press release gives the full story, which is negative because the company could certainly benefit from new leadership,” KDP Investment Advisors Inc. analyst Kenneth Duffel wrote in a note.
ATP shares tumbled 9.1 percent to $5.31 at the close in New York, the biggest drop since May 18.