Chesapeake Energy notes down after bankruptcy filing; PG&E in focus as exit nears

By James McCandless

San Antonio, June 29 – The distressed debt market started a short week focused on newsmakers in the oil and gas sector.

Chesapeake Energy Corp.’s notes moved downward after the company filed for bankruptcy after reaching an agreement with creditors.

Sector peer Occidental Petroleum Corp.’s established issues varied as it upsized a tender offer and a new trio of tranches traded.

As rising oil futures served as the backdrop, Whiting Petroleum Corp.’s and SM Energy Co.’s paper diverged.

Elsewhere, utilities name PG&E Corp.’s notes were active but ultimately unchanged as the company prepares to exit bankruptcy.

In the retail space, Rite Aid Corp.’s issues backed off of recent gains after starting a cash tender offer.

Pet supplies chain PetSmart, Inc.’s paper was under pressure.

Meanwhile, United Airlines Holdings, Inc.’s notes saw mixed results while American Airlines Group Inc.’s issues rose as airlines prepare for more flights in July.

Chesapeake trades lower

Chesapeake Energy’s notes moved downward at the end of the Monday session, traders said.

The 11½% notes due 2025 fell 3 points to close at 11¾ bid. The 6¼% senior notes due 2021 declined by 1½ points to close at 3½ bid.

On Sunday, the Oklahoma City-based independent oil and gas producer filed for Chapter 11 bankruptcy, Prospect News reported.

In a move that was first reported as a possibility in April, the company said it reached a restructuring agreement with 100% of the lenders under its revolving credit facility, holders of 87% of its term loan agreement obligations, holders of 60% of its senior secured second-lien notes due 2025 and holders of 27% of its senior unsecured notes.

The company plans to reduce its debt by $7 billion.

As part of the agreement, Chesapeake has secured $925 million in debtor-in-possession financing.

“That’s a significant chunk of debt they’re knocking out,” a trader said.

Occidental varies

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

The 2.9% senior notes due 2024 shaved off ¼ point to close at 85 bid. The 2.7% senior notes due 2022 picked up ¾ point to close at 94½ bid.

On Monday morning, the Houston-based oil and gas producer announced that it has upsized its previously announced tender offers and consents solicitations for up to $2 billion of nine series of notes due 2021 and 2022, Prospect News reported.

The offering was originally launched last Thursday at $1.5 billion.

To fund the offering, Occidental’s new trio of tranches priced on Friday and ending secondary trading on Monday in the 99 to par context.

“All three of those held pretty firm today,” a trader said. “I think that’s going to be the case for the short term at least.”

The offer is still expected to expire on July 23.

Oil names diverge

With rising oil futures serving as the backdrop, distressed energy tranches diverged, traders said.

West Texas Intermediate crude oil futures for August delivery picked up $1.21 to settle at $39.70 per barrel.

North Sea Brent crude oil futures for September delivery finished at $41.71 per barrel after a 69 cent boost.

Denver-based peer Whiting Petroleum’s paper differed in direction.

The 6¼% senior paper due 2023 shed ¼ point to close at 15¾ bid. The 6 5/8% senior notes due 2026 tacked on 2½ points to close at 17½ bid.

SM Energy, another Denver-based producer, saw its notes get dragged in different directions.

The 5 5/8% senior notes due 2025 dropped ¾ point to close at 53¼ bid. The 6¾% senior notes due 2026 added ¼ point to close at 51 bid.

PG&E active, flat

Elsewhere, utilities name PG&E’s issues were active but ultimately unchanged, market sources said.

The 6.05% senior notes due 2034, while touching 120 bid during the session, closed level at 119½ bid.

As the San Francisco-based electric utilities provider reaches the date of its bankruptcy exit at the end of the month, the company has spent the last few weeks raising capital.

At the tail end of last week, the company said that it sold $5.5 billion of common stock and equity units.

Its bankruptcy judge gave PG&E clearance to exit the process after more than a year of negotiating with creditors, state regulators and wildfire victims.

Rite Aid, PetSmart lower

In the retail space, Rite Aid’s paper backed off of recent gains, trader said.

The 6 1/8% senior notes due 2023 chalked off ¼ point to close at 97¾ bid.

In the two previous trading days, the Camp Hill, Pa.-based drug store name has seen improvements after starting an exchange offer for $750 million principal amount of its 2023 notes for newly issued 8% senior secured notes due 2026 plus cash.

The company plans to improve its debt profile by extending the maturity of a portion of the old notes to November 2026 from April 2023.

Phoenix-based pet supplies chain PetSmart’s notes were under pressure.

The 8 7/8% senior notes due 2025 slipped ¾ point to close at 100¼ bid. The 5 7/8% senior notes due 2025 lost ½ point to close at 100 bid.

Airlines active

Meanwhile, air traveler United’s issues saw mixed results, market sources said.

The 5% senior notes due 2024 fell 1¼ points to close at 81½ bid. The 4¼% senior notes due 2022 garnered 1¼ points to close at 86¾ bid.

In the middle of a spike in coronavirus cases, the Chicago-based airline’s structure was pulled in different directions as the sector pushes for increased operations in July.

Companies have made plans to increase domestic flights as international travel is slowly ramped up.

Fort Worth-based sector peer American Airlines, which announced that it would fill flights to capacity in July, saw its paper rise.

The 3¾% senior notes due 2024 improved 1 point to close at 48 bid.

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