Chesapeake notes in focus as interest payment skipped; PG&E up after new notes price

By James McCandless

San Antonio, June 19 – At the end of the week, the energy and utilities sectors garnered the most attention in the distressed debt space.

Chesapeake Energy Corp.’s notes varied as the company announced that it would skip an interest payment.

Modest gains for oil futures were mirrored by Whiting Petroleum Corp.’s and Callon Petroleum Co.’s issues while Occidental Petroleum Corp.’s paper diverged.

In the utilities space, PG&E Corp.’s notes pushed up following the pricing of $2 billion in senior secured notes.

Meanwhile, in retail, L Brands, Inc.’s issues were under pressure after pricing two tranches of senior notes late Thursday.

Sector peer Rite Aid Corp.’s paper improved.

Car rental name Hertz Global Holdings, Inc.’s notes saw mixed results after a week of turmoil over a proposed $500 million common stock sale.

Elsewhere, United States Steel Corp.’s issues tracked higher a day after executing its own common stock sale.

Chesapeake active

Chesapeake Energy’s notes varied in direction as the week’s activity ended, traders said.

The 11½% notes due 2025 shaved off ¼ point to close at 17½ bid. The 8% senior notes due 2025 held level at 5 bid.

After the Thursday close, the Oklahoma City-based independent oil and gas producer announced that it would skip interest payments on its 5.375% senior notes due 2021 and 8% senior notes due 2027, cumulating to $13.5 million.

The choice to forego the June 15 payment triggered a 30-day forbearance period.

At the same time, the company came to an agreement with some holders to waive certain events of default in exchange for reducing its borrowing base to $2.3 billion from $3 billion.

Throughout the week, news reports indicated that the company is preparing to file for Chapter 11 bankruptcy.

“We’ve been hearing that for a few months now, but it looks like that may come to fruition by the end of the month,” a trader said.

Also on Friday, Chesapeake received a ratings downgrade from S&P Global Ratings.

The agency cut its overall rating to D from CC and slashed issue-level ratings following the news of the skipped payments.

Oil trends up

Modest gains for oil futures were mirrored by distressed energy tranches, market sources said.

While making strides as more members of OPEC promised to adhere to supply cuts, renewed demand worries related to the pandemic softened those gains.

West Texas Intermediate crude oil futures for August delivery picked up 91 cents to settle at $39.75 per barrel.

North Sea Brent crude oil futures for August delivery capped the week at $42.19 per barrel after a 68 cent boost.

Denver-based producer Whiting Petroleum’s issues were carried higher.

The 6¼% senior notes due 2023 improved by 1 point to close at 16½ bid. The 6 5/8% senior notes due 2026 rose ½ point to close at 16 bid.

Houston-based peer Callon Petroleum’s paper also followed the prevailing trend.

The 6 1/8% senior notes due 2024 shot up 4 points to close at 42½ bid.

Occidental Petroleum, another Houston-based producer, saw only slight movement in its notes.

The 2.9% senior notes due 2024 closed level at 88 bid. The 2.7% senior notes due 2022 inched up ¼ point to close at 93½ bid.

PG&E better

In the utilities space, PG&E’s issues were pushed up, traders said.

The 6.05% notes due 2034 gained ½ point to close at 121 bid.

Late Thursday, the San Francisco-based bankrupt electric utility priced a downsized $2 billion of senior secured notes in two tranches, Prospect News reported.

The notes were downsized from an initial $3.75 billion.

Included in the deal is $1 billion of eight-year notes to yield 5% and $1 billion of 10-year notes to yield 5¼%.

Proceeds will go to funding the utility’s exit from bankruptcy, which is expected at the end of the month.

On Wednesday, the company’s bankruptcy judge filed a decision to approve its plan of reorganization, calling its Chapter 11 case “among the most complex in U.S. bankruptcy history.”

Final approval was expected on Friday.

L Brands under pressure

Meanwhile, in the retail sector, L Brands’ paper was under pressure, market sources said.

The 6¾% senior notes due 2036 gave up 4 points to close at 81½ bid. The 5¼% senior paper due 2028 fell 2¾ points to close at 80 bid.

The Columbus, Ohio-based retailer’s structure continued to see increased activity into the tail end of the week after the company sold $750 million of 6 7/8% senior secured notes due 2025 and $500 million 9 3/8% senior notes due 2025 in a Thursday private placement offering.

Both tranches pushed above par as they became free to trade.

The sale is meant to fund the redemption of L Brands’ outstanding 2021 notes.

Camp Hill, Pa.-based drug store chain Rite Aid’s notes improved.

The 6 1/8% senior notes due 2023 garnered ½ point to close at 96¾ bid.

Hertz notes mixed

Car rental name Hertz’s issues saw mixed results to finish the week, traders said.

The 6¼% senior notes due 2022 dived 6½ points to close at 24 bid. The 5½% senior notes due 2024 rose ½ point to close at 31½ bid.

After a tumultuous week for the Estero, Fla.-based car rental company, its structure was pushed in different directions.

Following a push to sell $500 million of additional common stock to fund its bankruptcy on Monday, the deal was ultimately shelved after the Securities and Exchange Commission began making inquiries.

The regulator’s chairman said that it had “comments” on the move, which led to the deal’s suspension on Thursday.

Repeatedly, the company warned potential investors that the stock would likely be worthless unless its creditors were paid back in full.

U.S. Steel higher

Elsewhere, manufacturer U.S. Steel’s paper tracked higher, market sources said.

The 6 7/8% senior notes due 2025 picked up ¾ point to close at 77¾ bid. The 6¼% senior paper due 2026 gained ¼ point to close at 74¾ bid.

The Pittsburgh-based steel name’s structure, in contrast, has seen two days of positive activity after executing its own additional share sale.

Another 50 million shares of common stock were sold for proceeds of about $429 million.

The recent positivity came despite Wednesday’s news that the company expected a loss per share of $3.06, higher than the original $1.73 per share loss expectation.

© 2015 Prospect News.
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