Shale Company Defaults On $175 MM In Bonds Without Making A Single Interest Payment
Update: And just to prove that people are indeed, idiots, moments ago this hits:
- ENERGY XXI GULF COAST, INC. PRICES UPSIZED PRIVATE OFFERING OF $1.45
BILLION OF 11.000% SENIOR SECURED SECOND LIEN NOTES DUE 2020
We set the odds at 75% that not even odd coupon payment will be made in this case either.
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It was just this past June when a report on Seeking Alpha quizzically asked, “Can American Eagle Energy Corporation Fly High Like An Eagle Over The Next Months?”
The answer, it turns out, is no.
According to a Bloomberg report, the Colorado oil producer, whose stock is now trading at a very sub-eagle $0.20, or about $6MM in market cap (the stock was at $6.00 when the Seeking Alpha report came out) has announced it will not make even one coupon payment on its bonds issued less than seven months ago.
Bloomberg reports that after raising $175 million in a junk-bond offering, American Eagle Energy Corp. said Monday thatit wouldn’t make its first interest payment on the debt. And instead of fulfilling its naive bondholders dreams that they will collect an 11% annual coupon for the next 5 years and then get repaid in full, the company hired bankruptcy advisers, Canaccord Genuity and Seaport, to negotiate a restructuring plan with the bondholders. Said bondholders now have two options: give the company more time to try to become profitable (i.e., hope that oil somehow soars from here) or push it into default, and become the new equity holders following a debt for equity.
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