U.S. Steel notes trade lower as belts tighten; Oasis Petroleum up despite ratings cut

By James McCandless

San Antonio, March 27 – Capping the week in distressed debt activity, the focus remained on energy and manufacturing names getting squeezed by recent economic weakness.

United States Steel Corp.’s notes dropped after the company announced it was reducing spending plans and idling some operations.

In the energy space, Oasis Petroleum Inc.’s issues moved up despite a ratings downgrade late Thursday.

As futures ended the week negative, Whiting Petroleum Corp.’s and Patterson-UTI Energy, Inc.’s paper mirrored that movement as Occidental Petroleum Corp.’s notes gained ground.

Retailer L Brands, Inc.’s issues varied in direction after announcing that the company would be halting its dividend and furloughing employees.

Sector peer Revlon, Inc.’s paper diverged.

Elsewhere, tobacco company Pyxus International, Inc.’s notes saw mixed results as the company starts a strategic alternatives review.

Real estate name WeWork Cos. Inc.’s notes were under pressure as the company prepares to weather a loss of revenue as more workers stay at home.

U.S. Steel drops

U.S. Steel’s notes finished with a drop at the end of the week, traders said.

The 6¼% senior notes due 2026 fell 7¾ points to close at 62¼ bid. The 6 7/8% senior notes due 2026 shed 6¼ points to close at 67¾ bid.

The Pittsburgh-based steel producer announced early Friday that it is reducing its capital spending for 2020 by $125 million to $750 million in response to economic weakness due to the pandemic.

At the same time, the company said that it would increase its borrowings under its revolving credit facility by $800 million.

Considering the current conditions, the company also decided to idle one of its furnaces immediately and idle some operations at two facilities starting in May.

Also on Friday, S&P Global Ratings lowered the company’s senior unsecured debt rating to B- from B.

Oasis up

In the energy space, Oasis Petroleum’s issues moved up, market sources said.

The 6 7/8% senior notes due 2022 added 1½ points to close at 29 bid. The 6¼% senior notes due 2026 tacked on ¼ point to close at 17¾ bid.

After the close on Thursday, the Houston-based independent oil and gas producer received a ratings downgrade from S&P.

The agency lowered its issuer credit ratings to CCC+ from B+ and affirmed a negative outlook.

S&P said the company’s cash flow and leverage metrics were expected to weaken in response to the downturn in oil prices.

The agency also pointed to the company’s $963 million maturities coming due over the next 24 months as a potential catalyst for a distressed exchange.

“In the next month, you will start to see a lot of distressed exchanges in this sector,” a trader said.

Oil futures fall

As crude futures ended the week on a negative turn, distressed energy names mostly joined the trend, traders said.

West Texas Intermediate crude oil futures for May delivery slid $1.09 to end the week at $21.51 per barrel.

North Sea Brent crude oil futures for May delivery finished at $24.93 per barrel after a $1.41 loss.

Denver-based oil and gas producer Whiting Petroleum’s paper was pushed down.

The 6¼% senior notes due 2023 shaved off ¾ point to close at 9 bid. The 6 5/8% senior paper due 2026 slipped 1¾ points to close at 9½ bid.

Houston-based contract driller Patterson-UTI’s notes were also trailing.

The 3.95% senior notes due 2028 lost 10¾ points to close at 40¼ bid.

Houston-based peer Occidental Petroleum’s issues gained ground.

The 2.7% senior notes due 2022 picked up 3¼ points to close at 70 bid. The 2.9% senior notes due 2029 garnered 1½ points to close at 55½ bid.

L Brands, Revlon active

Retailer L Brands’ paper varied in direction throughout the session but ended higher, market sources said.

The 6¾% senior notes due 2036 climbed 3¾ points to close at 74¼ bid. The 5¼% senior paper due 2028 rose 1½ points to close at 75 bid.

On Friday afternoon, the Columbus, Ohio-based retail name announced that it would be indefinitely extending a deadline for store closures past the original March 29 target.

The company said that in the current climate, it is unable to predict the timing of store re-openings.

As part of a bid to strengthen its financial position, L Brands suspended its quarterly cash dividend, reduced its expenses and capital expenditures, cut its executive compensation and furloughed its store associates.

New York-based cosmetics producer Revlon’s notes tracked higher.

The 5¾% senior notes due 2021 tacked on 1 point to close at 84 bid. The 6¼% senior notes due 2024 declined by 4½ points to close at 24½ bid.

Pyxus mixed

Elsewhere, Pyxus’ issues saw mixed results as the day reached the close, traders said.

The 9 7/8% notes due 2021 shaved off ¾ point to close at 18 bid. The 8½% notes due 2021 improved by 3½ points to close at 88½ bid.

In the second half of the week the Morrisville, N.C.-based tobacco product producer’s structure saw heightened activity after announcing that it had begun a strategic alternatives review to find ways to maximize value.

Lazard and RPA Advisors have been retained as advisers for the review.

WeWork down

Real estate name WeWork’s paper was under pressure, market sources said.

The 7 7/8% senior notes due 2025 lopped off 3¼ points to close at 36¾ bid.

On Thursday, news broke that the New York-based coworking company had begun an effort to reassure investors that it would be able to weather the pandemic and the resultant market weakness.

The company told bondholders that, after burning through $1.4 billion last quarter, it has about $4.4 billion in cash and cash commitments.

In recent days, large investor SoftBank has indicated that it may renege on its commitment to purchase a $3 billion stake in WeWork.

© 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.