Denbury notes drop after bankruptcy filing; Bombardier gains as asset sale approved

By James McCandless

San Antonio, July 31 – Distressed debt trading focused Friday on the energy and manufacturing sectors.

Denbury Resources Inc.’s notes dropped after the company implemented a pre-packaged restructuring plan through Chapter 11 bankruptcy.

Sector peer Transocean Ltd.’s issues were under water after the release of its second-quarter earnings results.

Improvements in oil futures were mirrored by rises in Occidental Petroleum Corp.’s and Whiting Petroleum Corp.’s paper.

Elsewhere, manufacturer Bombardier Inc.’s notes gained after European regulators approved the sale of its rail unit.

Steelmaker United States Steel Corp.’s issues varied in direction after reporting lukewarm Q2 earnings.

In the airline space, United Airlines Holdings, Inc.’s paper diverged while American Airlines Group Inc.’s notes slipped.

Meanwhile, ATM name Diebold Nixdorf, Inc.’s notes weakened in the wake of its own second-quarter earnings report.

Denbury drops

Denbury Resources’ notes dropped by the conclusion of the Friday session, traders said.

The 9% notes due 2021 were off 1 point to close at 41½ bid. The 7¾% notes due 2024 shaved off ¼ point to close at 42½ bid.

After the close on Thursday, the Plano, Tex.-based independent oil and gas producer filed its reorganization plan under Chapter 11 bankruptcy, Prospect News reported.

The company said on Wednesday that it had entered into a restructuring support agreement with holders of 100% of revolving credit facility loans, 67.2% of second-lien notes and 70.8% of convertible notes that would eliminate $2.1 billion in bond debt.

In bankruptcy court on Friday, Denbury requested approval to obtain $615 million in debtor-in-possession financing.

“All of these E&P’s that are over-levered have to do something like this if energy prices stay low,” a trader said.

Transocean down

Sector peer Transocean’s issues were under water, market sources said.

The 7½% senior notes due 2031 were docked 1¼ points to close at 26¾ bid.

About $13 million of the notes were on the tape.

On Wednesday, the Steinhausen, Switzerland-based contract driller released its second-quarter earnings results.

The company reported that it broke even on earnings, better than the 27 cent loss that analysts had predicted.

Revenues also beat estimates at $930 million.

In its most recent quarterly fleet status report, the company reported a total backlog of $8.9 billion.

Oil rises

Improvements in oil futures were mirrored by distressed energy tranches, traders said.

West Texas Intermediate crude oil futures for September delivery garnered 35 cents to settle the week at $40.27 per barrel.

North Sea Brent crude oil futures for October delivery finished at $43.52 per barrel after a 36 cent bump.

Houston-based producer Occidental Petroleum’s paper improved.

The 2.9% senior notes due 2024 tacked on 1¼ points to close at 94½ bid. The 2.7% senior notes due 2022 added 1 point to close at 96¾ bid.

Denver-based peer Whiting Petroleum’s notes followed the overarching trend.

The 6¼% senior notes due 2023 grabbed 1 point to close at 19 bid.

Bombardier gains

Elsewhere, air and rail name Bombardier’s issues were seen gaining, market sources said.

The 5¾% senior notes due 2022 improved by 2 points to close at 95¼ bid. The 7 7/8% senior notes due 2027 rose 2 points to close at 80 bid.

On Friday morning, news broke that E.U. anti-trust regulators have approved the Montreal-based manufacturer’s $7.4 billion sale of its rail segment to French counterpart Alstom.

The deal, originally reached in February, is expected to close in the first half of 2021.

Last week, after gaining commitments for a $1 billion secured term loan due 2023, S&P Global Ratings cut the company’s unsecured notes rating.

U.S. Steel varies

Meanwhile, U.S. Steel’s paper varied in direction, traders said.

The 6 7/8% senior notes due 2025 shaved off ¼ point to close at 70¾ bid. The 6¼% senior paper due 2026 moved up ½ point to close at 67½ bid.

After the session ended on Thursday, the Pittsburgh-based steel producer released second-quarter earnings results.

The company showed a loss per share of $2.67, better than analysts’ consensus prediction of a $2.74 loss per share.

Revenues were reported at $2.09 billion, higher than analysts’ expectations.

“There was some expected weakness in sales that really dragged it down,” a trader said.

The company said that sales fell 41% year over year for the quarter and are down 31% overall for the year to date.

Airlines eyed

In the airline space, United Airlines’ notes saw a divergence, market sources said.

The 5% senior notes due 2024 were docked ½ point to close at 83½ bid. The 4¼% senior notes due 2022 tacked on ¼ point to close at 89¼ bid.

This week, the Chicago-based company’s structure saw more attention as the company warned of more potential employee furloughs.

News broke on Thursday that United Airlines has warned its pilots that more furloughs may be coming through the rest of the year and into 2021.

Tens of thousands of United Airlines’ employees have been notified of potential furlough notices recently as the industry grapples with decreased demand during the coronavirus pandemic.

Fort Worth-based peer American Airlines’ issues slipped lower.

The 5% senior notes due 2022 shed 1 point to close at 57 bid.

Diebold weaker

Meanwhile, ATM maker Diebold’s paper weakened, traders said.

The 8½% senior notes due 2024 dipped ¼ point to close at 90¾ bid.

In the last half of the week, the North Canton, Ohio-based connected commerce solutions provider saw heightened attention after putting out its Q2 earnings results.

The company reported a 38 cents per share profit and $890.5 million in revenues, both beating the consensus expectations.

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