Chesapeake Energy lower as oil futures crash; Bombardier rises as production ramps up

By James McCandless

San Antonio, April 20 – The distressed debt market was dominated by energy names as oil futures sank to a record low.

Chesapeake Energy Corp.’s notes shifted lower as the company suspended its dividend and oil futures hit negative levels.

As oil futures cratered to their lowest levels on record, Whiting Petroleum Corp.’s and Transocean Ltd.’s issues also dropped while Occidental Petroleum Corp.’s paper varied.

Meanwhile, aerospace name Bombardier Inc.’s notes rose as the company works to revamp production in its temporarily closed facilities.

In the telecom space, Frontier Communications Corp.’s issues diverged in the wake of last week’s bankruptcy filing.

Sector peer Intelsat SA’s paper also saw mixed activity

Rental company Hertz Global Holdings, Inc.’s notes were under water as the company tries to secure a financial rescue package.

Tobacco producer Pyxus International, Inc.’s issues were negative as it grapples with supply chain issues.

Chesapeake lower

Chesapeake Energy’s notes shifted lower at the beginning of the week, traders said.

The 7½% senior notes due 2026 lost 4 points to close at 4½ bid. The 11½% notes due 2025 trailed by 2 points to close at 7½ bid.

After the close on Friday, the Oklahoma City-based independent oil and gas producer announced that it would suspend its dividends on all series of its convertible preferred stock, effective immediately.

The company stressed that the move did not constitute a default.

Also last week, shareholders and the board of directors approved a one-to-200 reverse stock split in order to regain New York Stock Exchange compliance.

After the split was finalized last Wednesday, the company’s common stock experienced a sell-off.

Oil futures crash

As West Texas oil futures fell to their lowest levels on record, distressed energy tranches also dropped, market sources said.

As demand for oil has plummeted, futures went into negative territory as suppliers run out of storage space.

West Texas Intermediate crude oil futures for May delivery crashed $55.90 to settle at minus $37.63 per barrel.

North Sea Brent crude oil futures for June delivery finished at $25.57 per barrel after a $2.51 loss.

Denver-based independent oil and gas producer Whiting Petroleum’s issues dipped.

The 6¼% senior notes due 2023 were docked 2¼ points to close at 8 bid. The 6 5/8% senior notes due 2026 declined by 2¾ points to close at 6 bid.

Steinhausen, Switzerland-based offshore contract driller Transocean’s paper also trailed.

The 6½% senior notes due 2020 fell 5¾ points to close at 74¼ bid.

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

The 2.9% senior notes due 2024 gained 1¾ points to close at 73 bid. The 2.7% senior notes due 2022 gave back 4 points to close at 79 bid.

“We’re in uncharted territory,” a trader said. “If the trend holds, this going to tear apart a lot of overlevered producers.”

Bombardier rises

Meanwhile, aerospace name Bombardier’s issues rose, traders said.

The 7 7/8% senior notes due 2027 garnered 1½ points to close at 70 bid. The 6% senior notes due 2022 picked up 2 points to close at 78½ bid.

During the Monday session, reports indicated that the Montreal-based aerospace manufacturer is planning to gradually revamp production in its facilities.

Last month, the company announced that it would temporarily close production facilities in Canada and Europe in order to comply with government mandates on business closures to hamper the spread of Covid-19.

While it plans to temporarily convert a Canadian facility to make ventilator components, the name plans to open up its Belfast, U.K. plant on May 4.

Train production and heavy maintenance operations have already started at other locations in the United Kingdom.

Frontier, Intelsat mixed

In the telecom space, Frontier’s paper spent the session diverging, market sources said.

The 10½% senior notes due 2022 held level at 31¼ bid. The 11% senior paper due 2025 pushed up ¼ point to close at 32 bid.

Late last Tuesday, the Norwalk, Conn.-based wireline communications name filed for Chapter 11 bankruptcy with the support of creditors for a restructuring agreement.

As part of the proposed plan, the company would exit bankruptcy with its debt reduced by about $10 billion.

In response to the news, Moody’s Investors Service cut Frontier’s probability of default rating, corporate family rating and issue-level ratings.

Luxembourg-based satellite operator Intelsat’s notes also saw mixed activity.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 declined by 2 points to close at 61 bid. The 9½% senior notes due 2023 added 1½ points to close at 28 bid.

Hertz down

Vehicle renter Hertz’s issues were under water for the majority of the day, traders said.

The 5½% senior notes due 2024 dived 8¼ points to close at 37¾ bid. The 6¼% senior notes due 2022 shed 1¾ points to close at 51¼ bid.

The Estero, Fla.-based car rental company’s structure remains active as the company works to attain a financial rescue package as part of the U.S. government’s coronavirus response.

After the close on Monday, the company said that it would lay off 10,000 employees in response to the economic downturn.

Last month, the company commenced talks with banks on potential new financing options, including the issuing of new debt.

Pyxus negative

Tobacco name Pyxus’ paper saw its own negativity on Monday, market sources said.

The 9 7/8% notes due 2021 shaved off ¾ point to close at 17¾ bid.

The Morrisville, N.C.-based tobacco products producer received a ratings downgrade toward the end of the Friday session.

Moody’s cut its corporate family rating, probability of default rating, revolving credit facility rating and issue-level rating while shifting its outlook to negative.

Among the reasons for the downgrade was the company’s increasingly weak liquidity position and the difficulty of obtaining tobacco leaf to process as the coronavirus pandemic effects supply lines.

© 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.