Oasis Petroleum notes drop as interest payments deferred; U.S. Steel paper improves

By James McCandless

San Antonio, Sept. 18 – At the end of the week in the distressed debt space, the focus turned to energy and manufacturing names.

Oasis Petroleum Inc.’s notes dropped after the company reported that it would be deferring interest payments on two tranches.

While oil futures ended moving on different tracks, Occidental Petroleum Corp.’s issues also varied while Antero Resources Corp.’s paper spiked and Valaris plc’s notes fell.

Steelmaking name United States Steel Corp.’s issues improved after the company released an optimistic third-quarter outlook.

Elsewhere in manufacturing, Bombardier, Inc.’s paper diverged in direction.

In the telecom space, GTT Communications, Inc.’s notes pushed higher despite receiving two recent ratings downgrades.

Meanwhile, American Airlines Group, Inc.’s issues yielded mixed results while United Airlines Holdings, Inc.’s paper gained after the industry made a push for more federal aid this week.

Oasis notes decline

Oasis Petroleum’s notes dropped to finish the week, traders said.

The 6 7/8% senior notes due 2022 gave up 1½ points to close at 23 bid. The 6 7/8% senior notes due 2023 shed 1 point to close at 18½ bid.

During Friday activity, the Houston-based independent oil and gas producer announced that it had elected to enter into a 30-day grace period and defer making interest payments due Sept. 15 on the 2022 notes and its 2.625% senior convertible notes due 2023, Prospect News reported.

The company said that it was holding talks with its lenders and a group of ad hoc noteholders on a comprehensive financial restructuring to strengthen its balance sheet and financial position.

“Restructuring is the most likely outcome,” a trader said.

After the news, the company received a ratings downgrade from S&P Global Ratings.

The agency cut the ratings on the two tranches to D from CCC-.

S&P argues that it does not think that Oasis will make the interest payments within the 30-day grace period, forgoing that for a broader financial restructuring.

Oil names in focus

Oil futures ended the week moving on different tracks, emulated by distressed energy names, market sources said.

West Texas Intermediate crude oil futures for November delivery shot up 10 cents to cap the week at $41.32 per barrel.

North Sea Brent crude oil futures for November delivery finished at $43.15 per barrel after slipping by 15 cents.

Houston-based producer Occidental Petroleum’s issues varied.

The 2.9% senior notes due 2024 lost 1¾ points to close at 88¼ bid. The 2.7% senior notes due 2022 held level at 95½ bid.

Denver-based E&P Antero Resources’ paper spiked.

The 5 1/8% senior notes due 2022 gained 2¼ points to close at 85¼ bid. The 5% senior notes due 2026 closed level at 66¼ bid.

London-based contract driller Valaris’ notes fell.

The 5.2% senior notes due 2025 shaved off ¾ point to close at 4¾ bid.

U.S. Steel improves

Steelmaking name U.S. Steel’s issues were seen improving, traders said.

The 6 7/8% senior notes due 2025 rose 4 points to close at 77½ bid. The 6¼% senior notes due 2026 pushed up 2¾ points to close at 71½ bid.

On Friday morning, the Pittsburgh-based steel manufacturing name released guidance for the third quarter, showing an optimistic forecast.

Particularly, the company expects “significantly better” performance in its flat-rolled segment.

Chief executive officer David Burritt said, “improving market conditions experienced in June and July have accelerated through August and September.”

Burritt also said that some markets have bottomed out, paving the way for a sharp recovery amid increasing customer demand.

Additionally, the company expects to repay about $900 million of its loans by the end of the quarter.

Montreal-based airplane and railcar builder Bombardier’s paper diverged in direction.

The 6% senior notes due 2022 chalked off ½ point to close at 93 bid. The 7 7/8% senior paper due 2027 closed level at 76 bid.

GTT higher

In the telecom space, GTT’s notes pushed higher, market sources said.

The 7 7/8% senior notes due 2024 tacked on 1 point to close at 53½ bid.

In the last day, the McLean, Va.-based cloud networking services provider has received two ratings downgrades.

Moody’s Investors Service and Fitch Ratings made similar negative changes to the company’s ratings.

Moody’s slashed the company’s corporate family rating, probability of default rating, speculative grade liquidity rating and issue-level ratings.

Both agencies cited the recent news that GTT has further delayed the filing of its second-quarter earnings report as the trigger for the changes.

The company said that it had found accounting issues in relation to the filing and could be in imminent default if issues aren’t resolved with debtholders.

Earlier in the week, GTT’s principal accounting officer resigned.

Airlines active

American Airlines’ issues yielded mixed results, traders said.

The 5% senior notes due 2022 closed level at 72½ bid. The 11¾% senior notes due 2025 were docked ¾ point to close at 99½ bid.

This week, the airline industry, including the Fort Worth-based carrier, has made a concerted effort to convince U.S. lawmakers to pass a second round of payroll assistance before funding expires in October.

The company and several unions signed on to a letter sent to congressional leaders urging the body to approve more aid while sector executives met with officials at the White House on the matter.

If the aid is allowed to expire, American Airlines has said that thousands of employees would be at risk for furloughs.

Chicago-based sector peer United Airlines’ paper gained.

The 5% senior notes due 2024 moved up ½ point to close at 90½ bid. The 4¼% senior paper due 2022 improved by ¼ point to close at 95 bid.

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