In my post earlier today, I mentioned the Energy XXI 2nd lien 11% note trading at 70 cents. That was earlier this month; it has actually plummeted to 61.25 cents today, if you can believe that. A current yield of 18 percent!
According to Bloomberg, it turns out that the company is negotiating with bondholders to swap some of the unsecured notes for new secured debt:
"Holders of notes due in 2017 and 2018, the two nearest maturities, offered to lengthen their debt in exchange for their $1.3 billion of securities being converted to secured obligations"Apparently, one of the unsecured noteholders is Hutchin Hill Capital and the group is being represented by WilmerHale. The article says that the noteholders want 20 cents on the dollar more than current trading levels, which would be 50-60 cents.
This only make sense for a 2017 unsecured noteholder who thinks that the company will restructure before his debt matures and the recovery for unsecureds will be less than 50 cents on the dollar. Often, companies doing debt exchanges will offer equity to creditors. I suspect in this case, the equity and unsecured are both perceived as potentially worthless, and the focus is on a scramble to get a secured claim.