I spoke about this earlier this week and the timing was rather good, if I don’t say so myself.
CHK bonds are plunging to new lows and there is a problem here. As debt/eq levels rise, capital raises will become impossible.
Nine of the energy producer’s unsecured notes plummeted, some losing more than 12 cents on the dollar, as it was the most actively traded company in the junk-debt market. Credit-default swaps, which are used by investors to protect against defaults, rose to the highest ever.
The company’s $1.1 billion of unsecured notes due 2017 dropped 12.2 cents to 70.75 cents on the dollar at 11:48 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. One of its biggest bonds, the $1.5 billion of floating-rate notes due 2019, fell 7.4 cents to 43.6 cents at 11:48 a.m. in New York, the data show.
Five-year CDS contracts rose 5.5 percentage points to 53.5 percent upfront, according to S&P Capital IQ. Swaps are used to protect investors against losses on company debt, and the price increases along with doubt about a firm’s creditworthiness.
I know the lot of you would rather gossip about the evil Martin Shkreli all day long; but this is far more important. CHK’s $12 billion in debt is only the tip of the iceberg, of what could doom $100’s of billions in commodity related debt.
At some point, banks will need to start writing this stuff down. It will be interesting to see how the market responds to suchness (extra Mrs. Fly).
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Boy I wanna know who sold the CDs contacts.
Dr. Fly (House) –
1) Great job with the CHK timing. You are truly a guru.
2) There’s no place/section/headed on the site for Bluestar’s blogs (as sparse as they come relatively speaking). One can’t scroll down the main-page to see him but will have to know about him and his small hyperlink in the Peanut Gallery website heading drop down. Can this be fixed?
3) I’m pretty lazy and sometimes don’t want to click on things.
4) What do you make of Treasuries rallying over the last 6 1/2ish trading days in light of the hawkish FED color & equities rally? Seems a bit counter intuitive to have both Trsy and S&P rally in light of the the good data *unless it’s just sideline portfolio money getting back into previous positions*
TLT in a wedge range. Breakout determines direction
not necessarily – could be a false breakout if that happens.
I’m talking more than just drawing Darby boxes and wedges on a chart though. I’m trying to see if the narrative makes sense b/c right now I don’t get it.
breakout with follow through, I left that out bc you’re a pro
Was saying I think current movement looks insignificant it’s drifting
I like how Square was priced to open today. If they keep that up (reasonable IPO opening prices), fuggeddabout bonds & stocks become the heavy favored asset class.
Poor $BALT.
Lol, suchness?
Dr Fly must have married a genuine “Colleen” and she’s catching his eye tonight.
I enjoy speaking of Miss Audrey McClendon and the demise of her God forsaken debt machine we once called Chesapeake Energy. Audrey fleeced the country for a few years by inflating natural gas futures to unheard of levels. I nearly died laughing when she received a margin call at the lows in 2008. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ac.ZepgPjAfI
Then her world came crashing down again in 2012 when she lost control of her company by being ousted by the board. http://www.forbes.com/sites/energysource/2012/04/23/aubrey-mcclendon-must-be-stopped/
Audrey McClendon and her ilk are precisely the reason why Walstreet gets the reputation it deserves.
One can only hope that Audrey loses American Energy Partners in another scandal.
Oh, and btw, CHK sparked the collapse of oil/gas in 2008. They bought some company for an over-inflated price and the initial reaction was a run-up in the stock, then the stock opened and started a precipitous fall down to where Audrey sold her stock.