Large chunks of Rex Energy second lien bonds have been changing hands in block trades this week following the debtor’s approval of its sale to PennEnergy, according to two sources familiar with the company.
Among the large sellers has been Franklin Resources, which offloaded roughly 100m, said the sources. The buyers include Farallon Asset Management and Weiss Asset Management, a Boston-based firm that bought roughly 30m of the bonds, added one of the sources.
Franklin sold its block of the USD 610m second lien notes due 2020 around 27.5, while Weiss and Farallon bought in at similar levels, the sources added.
According to MarketAxess, the notes last traded at 27.613, compared to Rex’s second lien recovery value of 26%, coming from a USD 162m cash payment.
The move to buy in at a slight premium to recovery levels may give buyers incentive to stir for nuisance value in a push for higher recoveries, sources said. Previously in the case, the second lien group – led by Franklin Resources, Loomis Sayles and Mackay Shields – had been trying a purchase of the company, but ultimately lost out to Penn in the auction, as reported by Debtwire. Now, the influx of new creditor constituents could signal last minute game theories at play, likely predicated on projections for rising oil prices, the sources added.
The debtor’s restructuring support agreement (RSA) was previously backed by all of its first lien lenders and 72% of its second liens.
Franklin, Farallon and Weiss did not respond to requests for comment.
[Editor’s note: This story has been updated since initial publication to include reporting that Farallon was one of the buyers.]