Occidental Petroleum active as new notes offered; Rite Aid better as exchange starts

By James McCandless

San Antonio, June 25 – The distressed debt market spent Thursday focused on names making financing maneuvers in the energy and retail sectors.

Occidental Petroleum Corp.’s notes varied in direction as the company kicks off an offering of three tranches to fund a tender offer.

Despite gains for oil futures, Chesapeake Energy Corp.’s and Valaris plc’s issues declined while Whiting Petroleum Corp.’s paper diverged.

In the retail space, Rite Aid Corp.’s notes saw better levels after it announced the start of a cash tender offer.

Sector peer Revlon, Inc.’s issues saw mixed results.

Meanwhile, restaurant chain owner CEC Entertainment, Inc.’s paper drifted lower after the company filed for Chapter 11 bankruptcy.

American Airlines Group Inc.’s notes were also negative amid a spike in coronavirus cases.

And car rental company Hertz Global Holdings, Inc.’s issues were seen gaining ground.

Occidental varies

Occidental Petroleum’s notes varied in direction toward the end of the day, traders said.

The 2.9% senior notes due 2024 were docked 1 point to close at 86½ bid. The 2.7% senior notes due 2022 rose ½ point to close at 95¼ bid.

About $24 million of the notes combined changed hands.

The Houston-based independent oil and gas producer expects to price senior bullet notes in three benchmark tranches on Friday, Prospect News reported.

The offering consists of five-year notes, seven-year notes and 10-year notes.

With the proceeds of the offering, the company plans to fund cash tender offers and consent solicitations for up to $1.5 billion of nine series of senior notes due 2021 and 2022.

The offers are slated to expire at 11:59 p.m. ET on July 23.

“Ultimately, it’s a positive for them,” a trader said. “It should relieve some short-term pressures.”

Also on Thursday, Occidental said that it expects an asset write-down of $9 billion in the second quarter.

Oil names decline

Despite gains for oil futures, distressed energy tranches trended negatively, market sources said.

West Texas Intermediate crude oil futures for August delivery moved up 71 cents to settle at $38.72 per barrel.

North Sea Brent crude oil futures for August delivery finished at $41.05 after racking up 74 cents.

Oklahoma City-based producer Chesapeake Energy’s issues were under water.

The 11½% notes due 2025 gave up 1½ points to close at 14½ bid. The 6 1/8% senior notes due 2021 shaved off ¼ point to close at 4 bid.

London-based contract driller Valaris’ paper followed the negative trend.

The 7¾% senior notes due 2026 fell 2 points to close at 7 bid.

Denver-based peer Whiting Petroleum’s notes diverged in direction.

The 6¼% senior notes due 2023 improved by ¼ point to close at 15¾ bid. The 6 5/8% senior notes due 2026 gave back ¾ point to close at 15 bid.

Rite Aid better

In the retail space, Rite Aid’s issues saw better levels, traders said.

The 6 1/8% senior notes due 2023 gained 2¼ points to close at 97¼ bid.

During the Thursday session, the Camp Hill, Pa.-based drug store name announced that it has begun an exchange offer for up to $750 million principal amount of its 2023 notes for newly issued 8% senior secured notes due 2026 plus cash, Prospect News reported.

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

“Everyone has to extend the time horizon on these maturities to relieve some of the pressure that the coronavirus puts on them,” a trader said.

New York-based cosmetics producer Revlon’s paper was active.

The 5¾% senior notes due 2021 shot up 4¼ points to close at 69½ bid. The 6¼% senior paper due 2024 gained ¼ point to close at 23¼ bid.

CEC lower

Meanwhile, restaurant name CEC’s notes drifted lower, market sources said.

The 8% senior notes due 2022 shed 3 points to close at 11½ bid.

On Wednesday, the San Jose, Calif.-based parent company of Chuck E. Cheese and Peter Piper Pizza restaurants filed Chapter 11 bankruptcy, Prospect News reported.

The company said that the filing was made to overcome the financial strain resulting from prolonged Covid-19-related venue closures and to position the company for long-term success.

As of Wednesday, CEC had reopened 266 company-owned locations in line with local, state and federal regulations and expects them to operate normally through the restructuring process.

AA negative

American Airlines’ issues were also pushed into negative territory, traders said.

The 5% senior notes due 2022 shed 1½ points to close at 58½ bid. The 3¾% senior notes due 2025 dropped 3½ points to close at 49½ bid.

Amid a spike in coronavirus cases across the country, travel-related names like Fort Worth-based airline American Airlines saw requisite weakness in their structures as the market gauges future travel numbers in the near-term.

“If everyone goes back inside again, airlines are going to have to get federal help again,” a trader said. “At the very least layoffs are likely.”

On Wednesday, the airline terminated plans for a $500 million four-year senior secured term loan B.

Instead the company sold a senior secured notes offering at $2.5 billion, a $1 billion offering of five-year convertible notes and 74.1 million in common stock at $13.50 per share.

Hertz gains

Car renter Hertz’s paper was seen gaining ground, market sources said.

The 6¼% senior notes due 2022 were positive by 3¼ points to close at 30½ bid. The 5½% senior paper due 2024 jumped up 4 points to close at 30½ bid.

The Estero, Fla.-based company’s notes have been pushed higher over the last few trading days after analysts at Jefferies argued that auto sellers CarMax and AutoNation could potentially buy Hertz’s used car inventory to raise capital for Hertz’s bankruptcy process.

Analysts project that the sale could net $3 billion.

In the wake of its recent bankruptcy filing, Hertz attempted to sell $500 million in additional common stock before withdrawing those plans amid scrutiny from regulators.

© 2015 Prospect News.
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