Occidental notes down after dividend news; U.S. Steel dips in manufacturing space

By James McCandless

San Antonio, Sept. 21 – The distressed debt market turned its attention on the energy and manufacturing sectors on Monday.

Occidental Petroleum Corp.’s notes were pushed down after news broke that the company would pay out $200 million in dividends in cash rather than common stock.

With oil futures feeling negative pressure, Antero Resources Corp.’s and Transocean Ltd.’s issues were also trailing while Oasis Petroleum Inc.’s paper varied.

Meanwhile, manufacturer United States Steel Corp.’s notes dipped as market optimism waned in the face of new coronavirus data.

Sector peer Bombardier, Inc.’s paper weakened.

Movie theater chain AMC Entertainment Holdings, Inc.’s notes fell after another week of lackluster box office returns.

Elsewhere, air carriers American Airlines Group, Inc.’s and United Airlines Holdings, Inc.’s issues were declining.

Occidental down

Occidental Petroleum’s notes were pushed down on Monday, traders said.

The 2.9% senior notes due 2024 slipped 1½ points to close at 86¾ bid. The 2.7% senior notes due 2022 lost 1 point to close at 94½ bid.

During the Monday session, news broke that the Houston-based independent oil and gas producer will pay $200 million in preferred stock dividends to Berkshire Hathaway in cash rather than common stock.

The company started paying the dividend in common stock since April in an attempt to preserve liquidity in the face of collapsing energy prices.

Occidental will pay Berkshire Hathaway $2,000 per share of its series A cumulative perpetual preferred share.

“They still have a lot of debt, but this move shows a higher level of confidence to deal with it,” a trader said.

Earlier in the month, Occidental concluded an eight-series tender offer where more than $2 billion was tendered for exchange.

Oil weakens

With oil futures feeling negative pressure, distressed energy names were mostly trailing, market sources said.

West Texas Intermediate crude oil futures for November delivery shed $1.78 to finish at $39.54 per barrel.

North Sea Brent crude oil futures for November delivery were pegged at $41.44 per barrel after a $1.71 loss.

Denver-based producer Antero Resources’ issues were under water.

The 5 5/8% senior notes due 2023 declined by 1¾ points to close at 75¾ bid. The 5% senior notes due 2025 gave back 1¼ points to close at 65 bid.

Steinhausen, Switzerland-based contract driller Transocean’s paper joined the trend.

The 7½% senior notes due 2031 shed 2½ points to close at 15½ bid. The 7½% senior paper due 2026 declined 3 points to close at 23 bid.

Houston-based E&P Oasis Petroleum’s notes varied in direction.

The 6 7/8% senior notes due 2022 dipped 1¼ points to close at 21¾ bid. The 6 7/8% senior notes due 2023 tacked on ¼ point to close at 18¾ bid.

U.S. Steel, Bombardier down

Meanwhile, U.S. Steel’s issues fell, traders said.

The 5% senior notes due 2026 dived 6½ points to close at 84½ bid. The 6¼% senior notes due 2026 were docked 1¼ points to close at 70¼ bid.

The Pittsburgh-based steelmaker’s structure, along with other manufacturing names, were being pushed downward as the market takes in new coronavirus data from Europe.

Spain and other countries are seeing a resurgence in Covid cases, which analysts think will lead to the reinstatement of restrictions to prevent spread.

“That would harm what companies are trying to do to recover what they have lost,” a trader said. “Producers like U.S. Steel could see the same loss of demand for product again.”

Late last week, the company released its guidance for the third quarter, showing a more optimistic depiction of the future.

In the report, chief executive officer David Burritt said that improvements in market conditions in June and July have accelerated through August and September, which will lead to increased demand.

Montreal-based air and rail builder Bombardier’s paper weakened.

The 7½% senior notes due 2025 shaved off ¾ point to close at 76¾ bid. The 6% senior notes due 2022 lost 1½ points to close at 91½ bid.

AMC falls

Movie theater chain AMC’s notes took a fall, market sources said.

The 12% notes due 2026 moved down 6 points to close at 32 bid.

Throughout the Monday session, the Leawood, Kan.-based entertainment company was seeing negative attention after the release of the weekend’s box office results.

The industry reported $13.5 million in domestic receipts, which was lower than the previous week’s tally.

“They are in a tough position,” a trader said. “Studios are reluctant to put things out in physical locations. There’s a chance cases go back up, and a lot of people aren’t comfortable sitting in a theater right now.”

Last month, the company decided to reopen 70% of its movie theater locations across the country.

Airlines lower

Elsewhere, American Airlines’ issues declined.

The 5% senior notes due 2022 fell 4 points to close at 68½ bid. The 11¾% senior notes due 2025 tripped 1½ points to close at 97 bid.

Last week, the Fort Worth-based airline and others in the industry continued to push the federal government to pass legislation for a second round of payroll aid.

In March, Congress passed $25 billion in aid for the industry, which is set to expire on Oct. 1.

In a letter to congressional leaders and a meeting with White House officials, the company stressed that thousands of people were at risk of furlough if the package is not renewed.

Chicago-based sector peer United’s paper was in the same boat.

The 5% senior notes due 2024 gave up 1½ points to close at 89 bid. The 4¼% senior notes due 2022 sank 2½ points to close at 92½ bid.

© 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.