WeWork notes up despite scrapped tender offer; Whiting Petroleum higher in energy space

By James McCandless

San Antonio, April 2 – Despite negative economic news, the distressed debt space saw positivity centered on the energy sector on Thursday.

WeWork Cos. Inc.’s notes gained despite news that a large investor will be pulling out of a $3 billion tender offer.

In oil and gas, Whiting Petroleum Corp.’s issues were lifted mainly on a reported deal between Saudi Arabia and Russia to curb oil production.

The potential deal led to better crude futures, embodied in California Resources Corp.’s and Valaris plc’s paper while Occidental Petroleum Corp.’s notes varied.

Meanwhile, shipping name Hornbeck Offshore Services Inc.’s issues rose amid news that it would file for Chapter 11 bankruptcy.

Car rental company Hertz Global Holdings, Inc.’s paper dropped as the company tries to chart out its path during the pandemic.

The retail space saw J.C. Penney Co., Inc.’s notes diverge while L Brands, Inc.’s issues weakened by the close.

WeWork gains

WeWork’s notes gained despite negative news on Thursday, traders said.

The 7 7/8% senior notes due 2025 added ¾ point to close at 36 bid.

On Thursday, news broke that large investor SoftBank has scrapped a tender offer for $3 billion of stock in the New York-based coworking startup.

In its statement announcing the change, Softbank said that several conditions went unfulfilled in order for the deal to continue.

Major breaches included antitrust issues, pending criminal and civil investigations against the company and restrictions placed on its locations due to the coronavirus pandemic.

Last week, the company told bondholders that it had enough cash to keep itself afloat during the crisis despite burning $1.4 billion in the previous quarter.

“I’m not sure what it looks like when people are allowed to be out again,” a trader said. “They may have to consider other types of offerings, but people were skeptical of them to begin with.”

Whiting up

In the oil and gas space, Whiting Petroleum’s issues were lifted, market sources said.

The 6¼% senior notes due 2023 tacked on 3 points to close at 8¼ bid. The 6 5/8% senior notes due 2026 rose 2¼ points to close at 8¼.

Despite its recent bankruptcy announcement and subsequent ratings downgrade, the Denver-based independent oil and gas producer’s issues rose with much of the market after president Donald Trump announced a potential deal between Saudi Arabia and Russia to cut energy production.

The company said that it filed for bankruptcy on Wednesday to reduce its debt by more than $2.2 billion and had reached an agreement in principle with holders of four series of notes on a restructuring agreement.

According to the terms, those holders would agree to exchange their notes for 97% of new equity.

Current shareholders would make up the remaining 3%.

Following the news, Moody’s Investors Service cut the company’s probability of default rating, corporate family rating and senior unsecured notes rating.

Oil better

Crude oil futures spiked on the potential deal, seen in distressed energy names, traders said.

President Trump said on Thursday that he had convinced the leaders of Saudi Arabia and Russia to come to an agreement over oil production cuts.

West Texas Intermediate crude oil futures for May delivery jumped up $5.01 to settle at $25.32 per barrel.

North Sea Brent crude oil futures for June delivery ended the day at $29.94 per barrel after a $5.20 rise.

Los Angeles-based producer California Resources’ paper followed the trend.

The 6% senior notes due 2024 gained ½ point to close at 3½ bid.

London-based contract driller Valaris’ notes also improved.

The 5.2% senior notes due 2025 were lifted ½ point to close at 11½ bid. The 7¾% senior notes due 2026 picked up 1 point to close at 11½ bid.

Houston-based sector peer Occidental Petroleum’s issues varied in direction.

The 3½% senior notes due 2029 shot up 4 points to close at 50 bid. The 3½% senior notes due 2025 moved lower by 1¾ points to close at 46¾ bid.

Hornbeck rises

Meanwhile, shipping name Hornbeck’s paper rose, market sources said.

The 5% senior notes due 2021 garnered 1 point to close at 4 bid.

In a filing with the Securities and Exchange Commission, the Covington, La.-based offshore transporter said that it plans to file for Chapter 11 bankruptcy by April 20.

The company has reached forbearance agreements with creditors that last until that time, giving it room to negotiate a restructuring agreement.

S&P Global Ratings reacted by lowering the company’s overall rating to D from SD and its unsecured notes rating to D.

Hertz drops

Car rental company Hertz’s notes saw a drop as the afternoon ended, traders said.

The 7 1/8% senior notes due 2026 shed 2½ points to close at 45 bid.

Amid growing economic instability, the Estero, Fla.-based company has seen reduced revenue as the travel industry grinds to a halt.

Last week, reports indicated that the name started discussing financing options with banks to weather the storm, including new loans and collateralizing its fleet of vehicles.

Hertz has also started furloughing employees.

L Brands down

The retail space saw J.C. Penney’s issues diverge, market sources said.

The 5 7/8% senior secured notes due 2023 added 1 point to close at 36 bid. The 8 5/8% notes due 2025 held level at 15½ bid.

In Tuesday’s session, the Plano, Tex.-based department store name received a ratings downgrade from Fitch Ratings.

Arguing that liquidity concerns have increased in recent days due to significant business interruptions, the agency dropped the long-term issuer default ratings of the company and its subsidiary J.C. Penney Corp., Inc. to CCC- from CCC+.

The retailer announced earlier this week that it would furlough 90,000 workers after closing its stores indefinitely to meet government recommendations on slowing the Covid-19 outbreak.

Columbus, Ohio-based peer L Brands’ paper weakened.

The 6¾% senior notes due 2036 shaved off ½ point to close at 71 bid. The 5¼% senior notes due 2028 dipped 3½ points to close at 70 bid.

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