Chesapeake Energy notes eyed amid stock maneuver; L Brands active in retail space

By James McCandless

San Antonio, April 23 – Newsmakers in the energy and retail sectors remained the focus in the distressed debt market on Thursday.

Chesapeake Energy Corp.’s notes diverged in direction as the company enacts a shareholder rights plan.

More gains for oil futures were followed by moves higher for Whiting Petroleum Corp.’s and Occidental Petroleum Corp.’s issues, while Valaris plc’s paper saw mixed results.

In the retail space, L Brands, Inc.’s notes varied a day after the prospective buyer of its Victoria’s Secret segment pushed for nixing the deal.

Sector peer Revlon, Inc.’s issues differed.

Meanwhile, utilities provider PG&E Corp.’s paper declined by the end of the day.

Car rental name Hertz Global Holdings, Inc.’s notes continued to sink as the market continues to react to its mass layoff news.

Wireline telecom company Frontier Communications Corp.’s issues also saw mixed movements.

Chesapeake diverges

Chesapeake Energy’s notes diverged in direction on Thursday, traders said.

The 7% senior notes due 2024 dipped 5½ points to close at 4½ bid. The 11½% notes due 2025 rose 2½ points to close at 7 bid.

After the close on Thursday, the Oklahoma City-based independent oil and gas producer announced that it had adopted a shareholder rights plan to prevent a takeover.

The plan, otherwise known as a poison pill provision, would allow shareholders to purchase common stock at a 50% discount if any person or group moves to acquire 4.9% or more of its outstanding common stock.

The company stated that the reason for the plan is to protect “net operating loss carryforwards.”

“It was very active today,” a trader said. “They are among those overlevered E&P names that are on the brink.”

Last week, the company’s shareholders and board of directors approved a one-to-200 reverse stock split in order to regain New York Stock Exchange listing compliance.

Energy gains

More gains for oil futures were followed by top distressed energy tranches, market sources said.

West Texas Intermediate crude oil futures for June delivery added $2.72 to end the afternoon at $16.50 per barrel.

North Sea Brent crude oil futures for June delivery finished at $21.33 per barrel after a 96 cent boost.

Denver-based producer Whiting Petroleum’s issues followed futures upward.

The 6¼% senior notes due 2023 garnered 2¼ points to close at 9¾ bid. The 6 5/8% senior notes due 2026 picked up 2½ points to close at 9 bid.

Houston-based peer Occidental Petroleum’s paper joined the overarching trend.

The 2.9% senior paper due 2024 shifted up 1½ points to close at 70 bid. The 2.7% senior notes due 2022 were pushed up 1½ points to close at 82 bid.

London-based contract driller Valaris’ notes saw mixed results.

The 5.2% senior notes due 2025 were lifted 1 point to close at 10¼ bid. The 7¾% senior notes due 2026 shaved off ½ point to close at 9½ bid.

L Brands, Revlon vary

In the retail space, L Brands’ issues varied during the day, traders said.

The 5¼% senior notes due 2028 fell 4¼ points to close at 69¼ bid. The 6 7/8% senior notes due 2035 held level at 68½ bid.

The market continued to react to the Columbus, Ohio-based retailer’s structure a day after the prospective buyer of a majority share in its Victoria’s Secret segment moved to scrap the deal in court.

Wells Fargo analysts said on Thursday that the deal is likely to go as planned and that the problems raised in Sycamore Partners’ lawsuit are most likely the opening position for a negotiation.

The private equity firm argued that failure to pay rent and its furloughing of its retail workers has reduced the company’s value.

New York-based cosmetics producer Revlon’s paper also differed.

The 5¾% senior notes due 2021 dived 8 points to close at 44½ bid. The 6¼% senior paper due 2024 chalked off ¼ point to close at 18¾ bid.

PG&E down

Meanwhile, utilities provider PG&E’s notes declined by the end of the day, market sources said.

The 6.05% senior notes due 2034 fell ¾ point to close at 109¾ bid.

The San Francisco-based bankrupt electric utility continued to see heightened activity after its Wednesday morning announcement that chief executive officer William Johnson would retire from the position on June 30.

The date coincides with the company’s bankruptcy exit target.

Board member William Smith will hold the position on an interim basis until a permanent replacement is found.

The company entered Chapter 11 bankruptcy in January 2019 after wildfires put it on the hook for potential billions of dollars in liabilities.

Johnson was appointed that April to oversee the bankruptcy process.

Hertz sinks

Car renter Hertz’s issues continued to sink through the week, traders said.

The 6¼% senior notes due 2022 slid 3½ points to close at 31 bid. The 5½% senior notes due 2024 tracked down 4¼ points to close at 25¾ bid.

At the beginning of the week, the Estero, Fla.-based vehicle rental company’s issues traded in the 40’s context before news broke late Monday that it would lay off 10,000 workers due to a coronavirus-weakened economy.

The company has been pushing for a financial rescue package from the government as the pandemic has significantly reduced travel.

Frontier mixed

Telecom name Frontier’s paper also saw mixed movements, market sources said.

The 10½% senior notes due 2022 shed ½ point to close at 31½ bid. The 11% senior notes due 2025 gained ½ point to close at 31½ bid.

The Norwalk, Conn.-based wireline communicator has been a perennial favorite in distressed telecom, most recently for last week’s Chapter 11 bankruptcy filing.

As part of the restructuring agreement with its creditors, the company plans to exit the bankruptcy process with $10 billion less in debt.

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