Occidental Petroleum active after investor dispute ends; Bombardier eyed as ratings cut

By James McCandless

San Antonio, March 25 – The distressed debt market saw more attention paid to energy and other names tied to commodities.

Occidental Petroleum Corp.’s notes varied in direction after agreeing to give a large investor board seats and announcing spending cuts.

More positivity from oil futures was followed by moves higher for Southwestern Energy Co.’s notes while Diamond Offshore Drilling, Inc.’s paper diverged and Whiting Petroleum Corp.’s notes slid.

In aerospace, Bombardier Inc.’s issues also saw mixed activity after the company received a ratings downgrade.

Chemicals producer Rayonier Advanced Materials Inc.’s paper weakened on the announcement that it would suspend or reduce lumber or newsprint production.

Meanwhile, REIT CBL & Associates Properties, Inc.’s notes improved after drawing $280 million under a senior secured credit facility.

Sector peer Washington Prime Group Inc.’s issues rose by the end of the day.

Utility PG&E Corp.’s paper tracked higher as some wildfire victims expressed concern over how market turmoil would effect their $13.5 billion settlement.

Occidental varies

Occidental Petroleum’s notes spent a third day atop the distressed debt space, with notes trading in varying directions, traders said.

The 2.9% senior notes due 2029 lost 1 point to close at 53¾ bid. The 2.7% senior notes due 2027 picked up 2½ points to close at 65½ bid.

The two tranches saw about $29 million trading.

Early Wednesday, news broke that the Houston-based independent oil and gas producer would add three members to its board of directors at the behest of activist investor Carl Icahn.

Andrew Langham, Nicholas Graziano and Margarita Palau-Hernandez have been chosen to fill the positions.

Icahn, who owns about 10% of the company, had been embroiled in a dispute with the company over enhancing performance.

Concurrently, Occidental announced a reduction in spending and employee salaries.

Its production budget has been slashed to $2.8 billion from an original $5.3 billion and chief executive officer Vicki Hollub will take an 81% pay cut.

Earlier this month, the company reduced its budget and significantly reduced its shareholder dividend.

Oil positive

More positivity from oil futures did not entirely translate to requisite gains in distressed energy names, market sources said.

West Texas Intermediate crude oil futures for May delivery improved by 48 cents to settle at $24.49 per barrel.

North Sea Brent crude oil futures for May delivery ended the session at $27.39 per barrel after a 24 cent add-on.

Spring, Tex.-based oil and gas producer Southwestern Energy’s issues saw a better day.

The 7¾% senior notes due 2027 gained 3¾ points to close at 63 bid.

Houston-based contract driller Diamond Offshore’s paper diverged in direction.

The 5.7% senior paper due 2039 garnered ½ point to close at 21¾ bid. The 3.45% senior notes due 2023 held level at 27½ bid.

Denver-based peer Whiting Petroleum’s notes declined.

The 6¼% senior notes due 2023 chalked off 2 points to close at 9 bid. The 6 5/8% senior notes due 2026 sannk 1½ points to close at 10½ bid.

Bombardier mixed

In aerospace, Bombardier’s issues saw mixed activity, traders said.

The 8¾% senior notes due 2021 declined by 1½ points to close at 79½ bid. The 7 7/8% senior notes due 2027 tacked on 2½ points to close at 67½ bid.

At the beginning of March, both tranches were trading around par.

Before the Tuesday open, the Montreal-based aerospace manufacturer received a ratings downgrade from S&P Global Ratings.

The agency lowered all of the company’s ratings, notably its issuer credit rating to CCC+ to B-.

S&P argues that with the coronavirus outbreak and its effect on the economy, the company’s capital structure is unsustainable in the long-term.

Despite this, S&P credits the company’s cash-heavy balance sheet for its view that a near-term liquidity crisis is not likely.

“It’s a direct result of the troubles that airlines are in,” a trader said. “Who would buy airplanes right now?”

Rayonier weaker

Rayonier’s paper finished the session weaker, market sources said.

The 5½% senior notes due 2024 lost 4¼ points to close at 37¾ bid.

The Jacksonville, Fla.-based company announced on Wednesday morning that it would cease or reduce operations at seven Canadian facilities that produce lumber and newsprint for two weeks.

The reduction affects all of its Ontario and Quebec softwood sawmills and its Ontario newsprint plant.

The move is a result of the impact that the coronavirus has had on the ability of businesses to operate in-person and on the economy.

CBL improves

Meanwhile, property company CBL’s notes were marked with an improvement, traders said.

Last week, the Chattanooga, Tenn.-based real estate investment trust’s operating partnership, CBL & Associates LP, drew $280 million under its $1.185 billion senior secured credit facility, Prospect News reported.

The company said the draws were made to increase liquidity and preserve financial flexibility in light of the current uncertainty surrounding the impact of the Covid-19 pandemic.

As it stands, the available balance of the line of credit is $680.8 million, including outstanding letters of credit of $4.8 million.

Columbus, Ohio-based sector peer Washington Prime’s issues also rose by the end of the day.

The 6.45% senior notes due 2024 climbed 1¼ points to close at 59 bid.

PG&E higher

Utilities name PG&E’s paper tracked higher, market sources said.

The 6.05% senior notes due 2034 shot up 5 points to close at 101 bid.

In the backdrop of the gains, wildfire victims were expressing concern on Wednesday that the impact of the coronavirus on the San Francisco-based bankrupt electric utility may put its $13.5 billion settlement at risk.

Half of the settlement is made up of payments of the company’s common stock, which has lost about half of its value since the beginning of the month.

The company will soon begin soliciting votes on its restructuring plan.

After the Monday close, PG&E said that it would plead guilty to 84 counts of involuntary manslaughter and one count of unlawfully starting a fire in relation to the 2018 Camp Fire.

© 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.