U.S. Steel notes eyed on increased output; United Airlines lower after posting loss

By James McCandless

San Antonio, Oct. 15 – Thursday activity in the distressed debt market was focused on manufacturing and travel names.

United States Steel Corp.’s notes varied after an iron and steel consortium reported the expansion of raw steel production.

In the travel space, United Airlines Holdings, Inc.’s issues were pushed lower after reporting its third-quarter results.

Sector peer American Airlines Group, Inc.’s paper was also trailing.

Retail name L Brands, Inc.’s notes were under pressure after announcing the final results of its four-series tender offer.

Cosmetics producer Revlon, Inc.’s issues diverged in direction after extending the early tender deadline on its exchange offer.

Meanwhile, Transocean Ltd.’s paper saw mixed activity as the company received a ratings downgrade.

In the oil and gas sector, Occidental Petroleum Corp.’s, SM Energy Co.’s and Antero Resources Corp.’s notes saw declines.

U.S. Steel flat to lower

U.S. Steel’s notes traded mixed through the Thursday session, traders said.

The 6.65% senior notes due 2037 fell 2½ points to close at 66½ bid. The 6¼% senior notes due 2026 closed level at 73 bid.

On Thursday, the Pittsburgh-based steelmaker’s structure saw heightened attention after an industry group reported positive numbers concerning the industry.

In its latest weekly report, the American Iron and Steel Institute reported 1,502,000 net tons in domestic raw steel production for the week ended Oct. 10.

The figure represents a 1.2% increase from the previous week.

Due to the coronavirus pandemic, however, steel production is 16.8% lower compared to this period last year.

According to another indicator, the benchmark price for hot rolled band steel reached $616 per net ton, up from the previous week’s $564 per ton.

Last month, the company said that it expects improved market conditions in the third quarter and moving into the end of the year.

Airlines trade lower

In the travel space, United Airlines’ issues were pushed lower, market sources said.

The 5% senior notes due 2024 dipped 1¼ points to close at 89 bid. The 4¼% senior notes due 2022 lost 1¼ points to close at 93 bid.

After the close on Wednesday, the Chicago-based air carrier released its financial results for the third quarter.

The company reported a loss per share of $8.16, wider than what analysts expected at $7.44 per share.

Revenues were pegged at $2.49 billion, missing predictions of $2.54 billion.

For the quarter, the airline reported a $1.8 billion loss.

Airlines have been consistently weakened over the last six months as the coronavirus pandemic hampers demand.

Negotiations between legislators and the Trump administration over a second round of $25 billion in aid for the industry are at a standstill.

Fort Worth-based sector peer American Airlines’ paper was also trailing.

The 5% senior notes due 2022 declined 1¼ points to close at 68½ bid. The 11¾% senior notes due 2025 shed ½ point to close at 99 bid.

L Brands down

Retail name L Brands’ notes spent the day under pressure, traders said.

The 6¾% senior notes due 2036 were docked ¼ point to close at 101¼ bid. The 5¼% senior notes due 2028 gave back 1¾ points to close at 99 bid.

On Thursday morning, the Columbus, Ohio-based specialty store company announced the final results of its tender offers and consent solicitations for four series of notes.

In total, the company accepted $808,471,000 principal amount of notes and will pay $850,521,589.20 on the settlement date.

The company was also soliciting consents from noteholders of the 2022 and the 2023 notes.

To fund the tender offer, L Brands priced an upsized $1 billion issue of 10-year senior notes.

Revlon diverges

Cosmetics producer Revlon’s issues diverged in direction, market sources said.

The 5¾% senior notes due 2021 were pushed down 3 points to close at 30 bid. The 6¼% senior notes due 2024 gained 1½ points to close at 13 bid.

At the end of Wednesday’s activity, the New York-based cosmetics producer extended the early tender deadline of the offer by subsidiary Revlon Consumer Products Corp. to exchange any and all outstanding $344,785,000 5¾% senior notes due Feb. 15, 2021 for cash or a combination of cash and ABL FILO term loans and new BrandCo second-lien term loans.

The early tender deadline was extended to 5 p.m. ET on Oct. 22 from 5 p.m. ET on Oct. 13.

As of 5 p.m. ET on Oct. 13, $38,976,000 of the notes, or 11.3% of the notes, had been validly tendered in the exchange offer and not withdrawn.

Transocean mixed

Meanwhile, oil and gas name Transocean’s paper saw mixed activity, traders said.

The 7½% senior notes due 2031 tacked on ¾ point to close at 14½ bid. The 6½% senior paper due 2020 chalked off ¾ point to close at 94¼ bid.

On Thursday, the Steinhausen, Switzerland-based contract driller received a ratings downgrade from S&P Global Ratings.

The agency lowered the company’s issuer credit rating to CC from CCC- and also cut the ratings on five series of notes.

S&P affirmed a negative outlook and said that it views the recently started tender offer for the five series as distressed exchanges.

The offer expires at 11:59 p.m. ET on Nov. 9.

Oil weakens

On a negative day for oil futures, distressed energy tranches saw declines, market sources said.

West Texas Intermediate crude oil futures for December delivery dipped 8 cents to settle at $40.96 per barrel.

North Sea Brent crude oil futures for December delivery finished at $43.16 per barrel after a 16 cent loss.

Houston-based independent oil and gas producer Occidental Petroleum’s notes followed futures downward.

The 2.9% senior notes due 2024 fell ½ point to close at 87½ bid. The 2.7% senior notes due 2022 shed 1 point to close at 95½ bid.

Denver-based producer SM Energy’s issues also moved lower.

The 5% senior notes due 2024 dived 6 points to close at 49 bid.

Antero Resources, another Denver-based E&P, saw its paper join the trend.

The 5 1/8% senior paper due 2022 lost ¼ point to close at 88¾ bid. The 5% senior notes due 2025 were pushed down 2½ points to close at 68 bid.

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