Aubrey McClendon’s second chance at building an oil and gas empire is showing cracks.
The billionaire founder and former CEO of Chesapeake Energy launched a half dozen new energy companies from scratch immediately after resigning from Chesapeake early 2013. His new ventures, housed under the American Energy Partners (AEP) umbrella, garnered generous backing from industry private equity stalwarts Energy Minerals Group (EMG) and First Reserve, which collectively contributed billions of dollars.
The ventures also proved popular in the high yield bond market. Last year, bond investors eager to wager on McClendon’s track record supplied billions of dollars to finance acquisitions and development of hundreds of thousands of acres of oil and gas fields.
A year later, with oil prices at just over $48 per barrel, there appears to be steep downside attached to that wager. Some of McClendon’s companies are struggling just to survive.
The $1.6 billion in bonds backing American Energy–Permian Basin, one of the AEP silos, trade at depressed levels around 59 cents on the dollar, after they were issued at 100 cents on the dollar last July. The bonds have attracted interest from some of the biggest names in vulture investing, such as Apollo Global Management, Centerbridge Partners, and Oaktree Capital, which have taken positions in Permian’s debt by buying in at discounted prices, sources told Debtwire.
Unless someone is willing to put more cash behind the company, the Permian project will likely have to scale back its capital spending for the year ahead – after already slashing 2015 spending plans by more than half versus its forecast in mid-2014 for around $1 billion. And that’s after the company already tapped investors for an additional $295 million in funds just last month when it raised a second lien bond to provide much-needed liquidity....MORE
