Denbury Resources notes active as bankruptcy expected; L Brands better in retail space

By James McCandless

San Antonio, July 29 – Energy and retail names took center stage in the Wednesday distressed debt market.

Denbury Resources Inc.’s notes diverged after the company inked a restructuring agreement with creditors ahead of an expected pre-packaged Chapter 11 bankruptcy.

With oil futures moving higher, Antero Resources Corp.’s issues also improved while Occidental Petroleum Corp.’s paper varied and Chesapeake Energy Corp.’s notes fell.

Meanwhile, in the retail space, L Brands, Inc.’s issues saw better levels after unveiling a $400 million plan to slash spending.

Sector peer Revlon, Inc.’s paper was under pressure after receiving a ratings downgrade.

Housewares marketer Tupperware Brands Corp.’s notes jumped higher after beating sales estimates for the second quarter.

Elsewhere, American Airlines Group Inc.’s and United Airlines Holdings, Inc.’s issues finished with mixed results.

Denbury diverges

Denbury Resources’ notes diverged in direction through Wednesday activity, traders said.

The 4 5/8% senior subordinated notes due 2023 declined by 1½ points to close at 1¾ bid. The 7¾% notes due 2024 gained 2¾ points to close at 42¾ bid.

About $24 million was on the tape as the session concluded.

On Wednesday, the Plano, Tex.-based E&P entered into a restructuring support agreement with holders of 100% of revolving credit facility loans, 67.2% of second-lien notes and 70.8% of convertible notes for a pre-packaged Chapter 11 plan that will eliminate its $2.1 billion of bond debt, Prospect News reported.

The company is seeking approval for the plan and expects to make the filing on or before July 30.

Some lenders have agreed to give the company a $615 million bankruptcy loan that would become exit financing later on.

“Some of that structure is moving for pennies,” a trader said. “So, a filing has been expected for a while.”

Earlier in the month, Denbury elected to skip $3 million in interest payments.

Oil names active

While oil futures spent the day moving higher, distressed energy names differed, market sources said.

West Texas Intermediate crude oil futures for September delivery picked up 23 cents to finish at $41.27 per barrel.

North Sea Brent crude oil futures for September delivery closed at $43.75 per barrel after a 53 cent jump.

Denver-based independent oil and gas producer Antero Resources’ issues also improved.

The 5 1/8% senior notes due 2022 grabbed 2¾ points to close at 80 bid. The 5% senior notes due 2025 rose 2 points to close at 63 bid.

Houston-based producer Occidental Petroleum’s paper varied in direction.

The 2.9% senior notes due 2024 held level to close at 94 bid. The 2.7% senior paper due 2022 gained 1 point to close at 96¾ bid.

Oklahoma City-based peer Chesapeake Energy’s notes fell.

The 11½% notes due 2025 weakened by ½ point to close at 11 bid.

L Brands better

Meanwhile, in the retail space, L Brands’ issues saw better levels, traders said.

The 6¾% senior notes due 2036 jumped up 6¼ points to close at 96 bid. The 5¼% senior notes due 2028 picked up 4½ points to close at 92 bid.

Early Wednesday morning, the Columbus, Ohio-based retailer announced a plan to cut its annual spending by $400 million.

As part of the plan, the company plans to enact layoffs consisting of about 15% of its corporate staff or about 850 employees.

L Brands is also working to identify ways to lower merchandise costs.

Concurrently, L Brands said that most of its Bath & Body Works outlets are reopened, expecting a 10% increase in sales going forward.

Last month, the company priced $1.25 billion of five-year notes after canceling the sale of its Victoria’s Secret division.

Revlon down

Sector peer Revlon’s paper spent the session under pressure, market sources said.

The 5¾% senior paper due 2021 dived 10 points to close at 26½ bid. The 6¼% senior paper due 2024 drifted 5 points to close at 16 bid.

During the Wednesday session, the New York-based cosmetics producer received a ratings downgrade from S&P Global Ratings.

The agency lowered the company’s overall rating to CC from CCC- and cut issue-level ratings.

S&P issued the cuts following Revlon’s start of an offer to exchange any and all of its outstanding amounts of 5¾% notes due February 2021 for a combination of new 5¾% notes due February 2024, which S&P considers an equivalent to a default.

Tupperware higher

Housewares name Tupperware’s notes jumped to higher levels, traders said.

The 4¾% senior notes due 2021 shot up 7½ points to close at 90 bid.

Before the market open on Wednesday, the Orlando, Fla.-based home products marketer released surprisingly positive second-quarter earnings results.

The company showed an earnings per share profit of 84 cents, surpassing analyst estimates of a 14 cents per share profit.

Revenues also beat predictions at $397.4 million.

Despite the positive news, the company issued a going-concern warning as it continues to hold talks with outside advisers to evaluate its debt profile.

“I think they will have to extend the maturity on the 2021 bonds to relieve some of that pressure,” a trader said.

American, United mixed

Elsewhere, American Airlines’ issues showed mixed results, market sources said.

The 5% senior notes due 2022 rose 1¼ points to close at 58½ bid. The 3¾% senior notes due 2025 shed 2¾ points to close at 47 bid.

In the previous two days, analysts have weighed in on the Fort Worth-based airline’s short-term prospects as it seeks to recover from the worst effects of the coronavirus pandemic.

On Tuesday, an analyst at Citi said that the company’s “substantial” debt load and a weak near-term booking curve posed a risk for the common stock.

Raymond James analysts argued on Monday that a more balanced risk-reward scenario has come out of a recent stock sell-off.

Chicago-based carrier United’s paper also moved on separate tracks.

The 5% senior notes due 2024 closed level at 85 bid. The 4¼% senior paper due 2022 dipped ½ point to close at 88 bid.

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