Existing Occidental notes trail as new tranches price; PG&E lower after equity offering

By James McCandless

San Antonio, June 26 – As the week came to a close, the distressed debt space was under pressure as new coronavirus cases weighed markets down.

Occidental Petroleum Corp.’s existing notes trailed in the run-up to the company’s sale of three tranches of new notes.

While oil futures weakened, Antero Resources Corp.’s issues followed while Valaris plc’s paper varied and Whiting Petroleum Corp.’s notes rose.

Meanwhile, PG&E Corp.’s issues moved lower after an equity offering raised more than $5 billion for utility’s exit from bankruptcy.

In air travel, American Airlines Group Inc.’s paper was under water as new worries about the coronavirus depressed the space.

Sector peer United Airlines Holdings, Inc.’s notes diverged.

Car rental name Hertz Global Holdings, Inc.’s issues also saw mixed movements as travel names come under scrutiny.

Elsewhere, in retail, Rite Aid Corp.’s paper gained after kicking off a cash tender offer.

Occidental in focus

Occidental Petroleum’s notes were spotted trailing as the week concluded, traders said.

The 2.9% senior notes due 2024 gave up 1¼ points to close at 85¼ bid. The 2.7% senior notes due 2022 lost 1½ points to close at 93¾ bid.

Toward the end of Friday activity, the Houston-based independent oil and gas producer priced $2 billion of senior notes in three tranches, Prospect News reported.

The deal includes a $500 million tranche of five-year notes that priced at par to yield 8%, a $500 million tranche of seven-year notes at par with an 8½% yield and $1 billion of 10-year notes that priced at par to yield 8 7/8%.

With the proceeds, the company plans to fund a nine-tranche cash tender offer comprising senior notes due 2021 and 2022.

“Those left the gate at a 99 context,” a trader said.

The tender offer is set to expire on July 23.

Oil weakens

While oil futures weakened, distressed energy tranches drifted in multiple directions, market sources said.

West Texas Intermediate crude oil futures for August delivery slipped 23 cents to finish at $38.49 per barrel.

North Sea Brent crude oil futures for September delivery settled at $41.02 per barrel after a 3 cent downward shift.

Denver-based producer Antero Resources’ issues followed futures downward.

The 5 1/8% senior notes due 2022 fell 2 points to close at 72 bid. The 5 5/8% senior notes due 2023 declined by 1 point to close at 65¼ bid.

London-based contract driller Valaris’ paper varied.

The 7¾% senior notes due 2026 picked up 2¼ points to close at 9¼ bid. The 4.7% senior notes due 2021 held level at 7 bid.

Whiting Petroleum, another Denver-based producer, saw its notes improve.

The 6¼% senior notes due 2023 tacked on ¼ point to close at 16 bid.

PG&E edges lower

Meanwhile, utilities name PG&E’s issues moved lower, traders said.

The 6.05% notes due 2034 shaved off ½ point to close at 119½ bid.

On Friday morning, the San Francisco-based electric utilities provider announced that it had raised more than $5 billion from a sale of common stock and equity units.

The company sold 423 million shares at $9.50, raising about $4 billion while the equity units netted $1.2 billion.

The equity units consist of a prepaid forward stock purchase contract and a zero-coupon U.S. treasury strip, Prospect News reported.

After recently receiving approval from a bankruptcy judge to exit Chapter 11, the company is slated to do so at the end of the month.

Airlines eyed

In air travel, American Airlines’ paper was under water, market sources said.

The 5% senior notes due 2022 dipped 1¾ points to close at 56¾ bid. The 3¾% senior notes due 2025 shed 2½ points to close at 47 bid.

The Fort Worth-based airline’s structure came under pressure again on Friday amid headlines of a resurgence in coronavirus cases across the country.

Amid some lockdown measures being re-implemented in a few states, the company said that it would begin to fill planes to capacity starting July 1.

This week, American sold $1 billion of five-year convertible notes and a $2.5 billion issue of 11¾% five-year senior secured bullet notes.

Chicago-based sector peer United Airlines’ notes diverged.

The 5% senior notes due 2024 improved by 1 point to close at 82¾ bid. The 4¼% senior notes due 2022 lost ¼ point to close at 85½ bid.

Hertz mixed

Car rental name Hertz’s issues saw mixed movements, traders said.

The 6¼% senior notes due 2022 declined by 1¼ points to close at 29¼ bid. The 5½% senior notes due 2024 gained ¼ point to close at 30¾ bid.

This week, the Estero, Fla.-based vehicle rental name saw more attention paid to its issues after analysts at Jefferies argued that Hertz could raise capital for its bankruptcy process by selling its used car stock to auto sellers CarMax and AutoNation.

The analysts projected potential sales of $3 billion.

After attracting negative attention from federal regulators for an attempted common stock sale, Hertz has shifted to more traditional bankruptcy funding avenues.

Rite Aid gains

Elsewhere, in retail, Rite Aid’s paper ended with gains, market sources said.

The 6 1/8% senior notes due 2023 grabbed ¾ point to close at 98 bid.

On Thursday, the Camp Hill, Pa.-based drug store chain commenced 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.

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

Also on Thursday, the company reported a first-quarter loss of 4 cents per share, beating analyst estimates of a 54 cents per share loss.

Revenues also eclipsed estimates at $6.03 billion.

© 2015 Prospect News.
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