Chesapeake notes dip as bankruptcy process starts; American Airlines notes in focus

By James McCandless

San Antonio, June 30 – Energy and travel sector names were the continued focus of distressed debt trading on Tuesday.

Chesapeake Energy Corp.’s notes dipped as the company starts its bankruptcy process after coming to a restructuring agreement with lenders.

While oil futures were under pressure, Occidental Petroleum Corp.’s and Antero Resources Corp.’s issues varied in direction as Whiting Petroleum Corp.’s paper rose.

Meanwhile, American Airlines Group Inc.’s notes diverged as more coronavirus cases put the spotlight on the company’s plans to revamp flight capacity.

Sector peer United Airlines Holdings, Inc.’s issues were also mixed by the close.

In the utilities space, PG&E Corp.’s paper slipped on the eve of its anticipated emergence from bankruptcy.

Elsewhere, in retail, Rite Aid Corp.’s notes were under water a few days after commencing a cash tender offer.

Department store name L Brands, Inc.’s issues lost ground.

Chesapeake dips

Chesapeake Energy’s notes dipped by the close, traders said.

The 7% senior notes due 2024 shaved off ½ point to close at 3½% bid. The 11½% senior notes due 2025 fell ¾ point to close at 11 bid.

In the middle of Tuesday trading, the Oklahoma City-based independent oil and gas producer was granted interim access to $325 million of its new-money debtor-in-possession financing, Prospect News reported.

Over the weekend, the company filed for Chapter 11 bankruptcy after striking a restructuring agreement with 100% of the lenders under its revolving credit facility, holders of 87% of its term loan agreement obligations, holders of 60% of its senior secured second-lien notes due 2025 and holders of 27% of its senior unsecured notes.

In all, about $7 billion of debt is expected to be slashed from the company’s balance sheet.

A final hearing for the DIP financing is scheduled for July 20.

Oil under pressure

While oil futures were under pressure, distressed energy names were pushed in different directions, market sources said.

West Texas Intermediate crude oil futures for August delivery declined by 43 cents to finish at $39.27 per barrel.

North Sea Brent crude oil futures for September delivery settled the day at $41.15 per barrel after a 56 cent slide.

Houston-based producer Occidental Petroleum’s issues varied in direction.

The 2.9% senior notes due 2024 added ¾ point to close at 85¾ bid. The 2.7% senior notes due 2022 lost 1¼ points to close at 93¼ bid.

Denver-based peer Antero Resources’ paper also drifted apart.

The 5 5/8% senior notes due 2023 improved by ¼ point to close at 64 bid. The 5% senior paper due 2025 trailed by ¾ point to close at 59 bid.

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

The 6 5/8% senior notes due 2026 grabbed ½ point to close at 18 bid.

Airlines active

Meanwhile, air traveler American Airlines’ issues diverged, traders said.

The 11¾% senior secured notes due 2025 picked up ¼ point to close at 95½ bid. The 4.95% senior secured pass through notes due 2024 gave back 1 point to close at 78¾ bid.

The two tranches combined saw about $32 million change hands.

As more coronavirus cases continued to be reported in hot spots around the country, the market turned its scrutiny toward the Fort Worth-based airline.

In recent days, the company announced its intention to restart filling its planes to capacity in July after not selling middle seats to enforce distancing measures.

The name also plans to expand domestic flights.

Chicago-based sector peer United Airlines’ paper was also mixed.

The 5% senior notes due 2024 garnered 2 points to close at 83½ bid. The 4¼% senior notes due 2022 was knocked down 1½ points to close at 85¼ bid.

“It’s a difficult situation,” a trader said. “They have to make money but have to factor in public health at the same time.”

PG&E notes slip

In the utilities space, PG&E’s notes slipped to lower levels, market sources said.

The 6.05% notes due 2034 lost ¼ point to close at 119¼ bid.

The San Francisco-based electric utility’s structure saw more attention on the eve of its expected emergence from bankruptcy.

In recent weeks, the company has focused on raising capital after a bankruptcy judge approved the exit.

Rite Aid edges lower

Elsewhere, in retail, Rite Aid’s issues were under water, traders said.

The 6 1/8% senior notes due 2023 shed ¼ point to close at 97½ bid.

As part of an effort to improve its debt profile, the Camp Hill, Pa.-based drug store chain began an exchange offer this week for $750 million principal amount of its 2023 notes for newly issued 8% senior secured notes due 2026 plus cash.

The intent is to extend a maturity wall to November 2026 from April 2023 for certain tranches.

Columbus, Ohio-based retailer L Brands’ paper lost ground.

The 5¼% senior notes due 2028 dipped ¾ point to close at 78¾ bid.

© 2015 Prospect News.
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