Two energy-related companies are postponing financings after a plunge in oil prices made their high-yield, high-risk debt more difficult to sell.
New Atlas, a newly formed unit of oil and gas producer Atlas Energy Group, put on hold a $155 million loan it was seeking to refinance debt, according to five people with knowledge of the deal, who asked not be identified because the decision is private. EnTrans International LLC, a manufacturer of equipment used in fracking, delayed selling a $250 million bond, according to three other people with knowledge of that transaction.
Investors in bonds of junk-rated energy companies are facing losses of more than $11 billion as oil prices dropped to a five-year-low of $63.72 a barrel this week. This is deepening concern that the riskiest oil explorers won’t be able to meet their obligations, and sending their borrowing costs to the highest since 2010.
More than half of Cleveland, Tennessee-based EnTrans’s revenue comes from equipment sales to the hydraulic fracturing and the energy industry, Moody’s Investors Service said in a Nov. 17 report. The notes, which were being arranged by Credit Suisse Group AG, would have been used to refinance debt.
Gary Riley, chief executive officer at EnTrans International, said yesterday in an e-mail commenting on the deal status that “the decision to defer or go forward has not been made.” Riley didn’t respond to questions seeking comment today.
Deutsche Bank AG and Citigroup Inc. were managing New Atlas’s financing and had scheduled a meeting with lenders for this morning, according to data compiled by Bloomberg.
Edward Cohen, chief executive officer of Atlas Energy, didn’t immediately return a telephone call seeking comment.
Bonds of junk-rated energy companies are yielding 9.76 percent, the most since June 2010, according to the Bloomberg USD High Yield Corporate Bond Energy Index.
High-yield loan prices have fallen each day this week to 96.72 cents on the dollar today, the lowest since Oct. 23, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index. The debt has tumbled from this year’s peak of 99.1 cents in July.
Vine Oil & Gas LP is offering lenders above-average yields to fund its purchase of natural-gas fields from Royal Dutch Shell Plc.
The Blackstone Group LP-backed exploration and production company is seeking $850 million of term loans, proposing to pay as much as seven percentage points more than the London interbank offered rate for a $500 million first-lien portion, according to data compiled by Bloomberg.
That’s more than the average 4.68 percentage-point spread for new first-lien loans sold to institutional investors as of Nov. 26, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data.
Dallas-based Vine said in August that it was buying more than 107,000 acres in Louisiana’s Haynesville shale basin from Shell, and that the deal was expected to close by year end.
Morgan Stanley, HSBC Holdings Plc, Credit Suisse, Societe Generale SA and Natixis SA are arranging the financing, which includes a $350 million second-lien loan being offered to investors for as little as 90 cents on the dollar, Bloomberg data show.
Peter Rose, a spokesman for Blackstone, didn’t immediately return a phone call seeking comment.