Occidental notes lower amid proxy fight, ratings cut; PG&E better in utilities sector

By James McCandless

San Antonio, March 23 – The distressed debt space saw more negativity to start the week with a focus on the oil and gas sector.

Occidental Petroleum Corp.’s notes lost ground as the company negotiates with an activist investor over board seats and received a ratings downgrade.

Sector peer Whiting Petroleum Corp.’s issues varied in direction after receiving its own cut to its ratings.

Small gains for crude oil futures did not translate to similar movements for Valaris plc’s and Antero Resources Corp.’s paper.

Elsewhere, in utilities, PG&E Corp.’s notes saw a better day as the company agreed to plead guilty to involuntary manslaughter resulting from a wildfire sparked by the company’s equipment.

REIT Washington Prime Group Inc.’s issues dropped after announcing that it would temporarily close all of its indoor mall properties.

CBL & Associates Properties, Inc.’s paper diverged in direction.

In the retail space, Party City Holdco Inc.’s and L Brands, Inc.’s notes were trailing at the end of the day.

Occidental declines

Occidental Petroleum’s notes lost some ground to kick off the week, traders said.

The 2.7% senior notes due 2022 fell 2½ points to close at 60½ bid. The 3.5% senior notes due 2029 dived 6½ points to close at 51 bid.

The two tranches combined to see about $37 million trading.

Over the weekend, a running dispute that the Houston-based independent oil and gas producer has had with activist investor Carl Icahn appeared to be abating as the two sides were reportedly nearing an agreement.

Icahn, who has been applying pressure on the company to improve its operations and change its executive makeup, is expected to be given three new board seats.

The investor owns a 10% stake in the company.

Early Monday, Fitch Ratings downgraded the company’s long-term issuer default rating and put all other ratings on negative watch.

The agency cited the sharp drop in energy prices, which gives way to weaker leverage metrics and cash flow issues.

Whiting varies

Sector peer Whiting Petroleum’s issues varied in direction, market sources said.

The 6¼ senior notes due 2023 shed 4¼ points to close at 8 bid. The 6 5/8% senior notes due 2026 tacked on ½ point to close at 9 bid.

On Monday morning, the Denver-based oil and gas producer received its own slate of downgrades from Moody’s Investors Service.

Moody’s lowered the company’s corporate family rating, probability of default rating, speculative grade liquidity rating and senior unsecured notes rating.

The outlook was revised to negative.

The agency said that the name faces tougher prospects in refinancing near-term maturities, increasing the possibility of pursuing a distressed exchange.

Last week, the company announced that it would reduce its capital investment in 2020 by $185 million as a result of weaker market conditions.

“The problem these names are having boils down to whether or not energy prices will move back up soon,” a trader said. “Right now, nobody can guarantee one way or the other.”

Oil mixed

While oil futures saw small gains, distressed energy names weakened, traders said.

West Texas Intermediate crude oil futures for May delivery moved up 73 cents to settle the day at $23.36 per barrel.

North Sea Brent crude oil futures for May delivery trickled up to $27.03 per barrel after a 5 cent rise.

London-based contract driller Valaris’ paper trailed.

The 5.2% senior notes due 2025 fell 3 points to close at 12 bid. The 7¾% senior paper due 2026 shaved off ¼ point to close at 13¾ bid.

Denver-based peer Antero Resources’ notes were also under pressure.

The 5 1/8% senior notes due 2022 shed 1½ points to close at 42 bid. The 5 5/8% senior notes due 2023 declined by 2 points to close at 34½ bid.

PG&E better

Elsewhere, in utilities, PG&E’s issues saw a better day, market sources said.

The 6.05% senior notes due 2034 added 1 point to close at 90½ bid.

The San Francisco-based bankrupt electric utility has resolved all state charges related to the 2018 Camp Fire through a plea agreement with the Butte County District Attorney and is working to get its plan of reorganization approved in bankruptcy court, Prospect News reported.

Under the agreement, the company will plead guilty to 84 counts of involuntary manslaughter and one count of unlawfully starting a fire stemming from the 2018 Camp Fire.

The company will pay the maximum of about $4 million in fines, including the expenses.

Late Friday, the utility said in a court filing that it had secured the support of California governor Gavin Newsom for its proposed Chapter 11 reorganization plan.

Washington Prime drops

Property name Washington Prime’s paper dropped, traders said.

The 6.45% senior notes due 2024 were pushed down 4¾ points to close at 56¾ bid.

On Monday morning, the Columbus, Ohio-based retail-focused real estate investment trust announced that it is temporarily closing its assets with an indoor common area.

Its assets with open air centers, which represents approximately 40% of its income, will remain open.

The company has offered its closed assets as potential distribution centers for government agencies.

On Friday, the company received ratings cuts from Moody’s and S&P Global Ratings.

Chattanooga, Tenn.-based REIT CBL’s notes diverged in direction.

The 5¼% senior notes due 2023 trailed by 2 points to close at 26 bid. The 4.6% senior notes due 2024 held level to close at 25 bid.

Party City trails

In the retail space, Party City’s issues trailed by the end of the day, market sources said.

The 6 5/8% senior notes due 2026 declined by 6½ points to close at 11 bid.

The Elmsford, N.Y.-based party supplies retailer’s structure has seen increasing weakness since announcing last week that it would temporarily close all of its retail locations through March 31.

As a result of the action and existing weakness in the sector, S&P cut the company’s overall rating to CCC+ from B.

Columbus, Ohio-based retailer L Brands’ paper was also moving down.

The 6¾% senior notes due 2036 cratered 12¾ points to close at 57½ bid. The 5¼% senior paper due 2028 dropped 1¾ points to close at 62 bid.

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