Distressed debt action lacking post-holiday; California Resources holds in after ‘mini-tender’ news

By Stephanie N. Rotondo

Seattle, July 5 – The distressed debt market was focusing on oil and gas names on Tuesday, though generally trading was deemed rather thin.

Market sources attributed the lack of liquidity to it being the first day back from a long holiday weekend.

California Resources Corp. bonds were unchanged to slightly weaker on the day. Its equity was also in decline, as investors reacted to news that TRC Capital Corp. had launched a “mini-tender” for the stock – a move that California Resources then rejected.

Also weaker were Whiting Petroleum Corp.’s convertible bonds. That weakness came as the company said it had swapped another $1.09 billion of debt for new mandatory convertible notes.

It did not help the energy space that domestic crude oil prices dropped over 4.5% on the day to $46.78 a barrel. The decline was attributed in part to concerns about the United Kingdom’s election to leave the European Union and how that might impact global economic growth. In turn, concerns about slowing growth added fuel to speculation that a global energy supply glut would endure.

Genscape Inc.’s latest inventory report seemed to give credence to that theory, as the data provider reported an over 200,000-barrel build at the Cushing, Okla. delivery point.

Furthermore, Baker Hughes said on Friday that active U.S. drill rigs continued to increase, with 11 new rigs coming online last week. Producing rigs had been on the decline as oil prices tanked, but a rally sparked in May resulted in some producers heading back into the fields.

CRC notes hang in

California Resources’ 8% second-lien notes due 2022 were somewhat steady on Tuesday, even as its equity took a hit.

The 8% notes ended unchanged to half a point lower at 71¼, according to a market source. The stock (NYSE: CRC) fell $1.41, or 10.8%, to $11.64.

The downward moves came in the wake of last week’s announcement that TRC Capital had made a “mini-tender” offer for up to 1.5 million shares of the oil and gas producer, or 3.6% of the outstanding equity. The price per share was $11.45, a 5.1% discount to the June 28 closing price.

California Resources then advised its shareholders to reject the offer.

So-called “mini-tenders” are a go-to strategy of TRC. The firm attempts to buy up stock directly from investors at below-market value. TRC then sells the shares and pockets any profits. Its previous targets have included Anadarko Petroleum Corp. and Duke Energy Corp.

Whiting weakens

Whiting Petroleum Corp.’s 1.25% convertible notes due 2020 fell Tuesday after the oil and gas company said it had swapped another $1.09 billion of notes for new mandatory convertible notes.

The 1.25% converts fell to 79 bid, 79.5 offered from 80 to 81 previously, according to a market source.

Another source placed the issue around 79, off nearly 2 points for the day.

The stock (NYSE: WLL) meantime dipped $1.22, or 12.63%, to $8.44.

Whiting has been exchanging five series of its notes for the new mandatory convertibles in an effort to shore up its bottom line amid declining oil prices. The most recent $1.09 billion exchange was done through private transactions executed June 29 through July 1. Prior to that, the company said on June 22 that it was exchanging $1.065 billion of old debt for the new debt.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.