California Resources notes lower as ratings cut; United Airlines eyed after layoff news

By James McCandless

San Antonio, July 8 – Closing out the Wednesday distressed debt space, the attention turned to energy and airlines.

California Resources Corp.’s notes declined after receiving a ratings cut based on the likelihood of a restructuring in the short term.

While oil futures were spotted improving, Denbury Resources Inc.’s issues followed suit while Occidental Petroleum Corp.’s paper varied and Whiting Petroleum Corp.’s notes slipped.

Elsewhere, United Airlines Holdings, Inc.’s issues diverged after warning of about 36,000 in potential furloughs.

Sector peer American Airlines Group Inc.’s paper was under pressure.

In the retail space, Party City Holdco Inc.’s notes declined despite news that the company’s common stock had regained NYSE compliance.

Department store name L Brands, Inc.’s issues were pushed lower.

Meanwhile, Diebold Nixdorf, Inc.’s paper gained ground as the company prepares to roll out a dual-currency offering of five-year senior secured notes.

California Resources lower

California Resources’ notes were seen declining as Wednesday came to a close, traders said.

The 8% notes due 2022 shaved off ¼ point to close at 3¾ bid.

Early Wednesday, the Los Angeles-based independent oil and gas producer received a ratings downgrade from Moody’s Investors Service.

The agency slashed the company’s corporate family rating, probability of default rating and several issue-level ratings.

Moody’s cited its belief that a near-term debt restructuring is highly likely after deciding to skip interest payments on May 29.

In March, reports indicated that the name was considering filing for bankruptcy, a story that continued to be reported in various outlets through June.

“It goes with the trend of E&P’s restructuring over the last several months,” a trader said. “It’s a surprise that they haven’t made a move yet.”

Oil improves

While oil futures were spotted improving, distressed energy tranches yielded mixed results, market sources said.

West Texas Intermediate crude oil futures for August delivery garnered 28 cents to settle the session at $40.90 per barrel.

North Sea Brent crude oil futures for September delivery closed at $43.29 per barrel after a 21 cent pickup.

Plano, Tex.-based producer Denbury’s issues followed suit.

The 9¼% notes due 2022 rose 1½ points to close at 42½ bid. The 7¾% notes due 2024 grabbed ¾ point to close at 41¾ bid.

Houston-based peer Occidental Petroleum’s paper varied in direction.

The 2.9% senior notes due 2024 garnered ¼ point to close at 89½ bid. The 2.7% senior paper due 2022 held level to close at 94¾ bid.

Denver-based producer Whiting Petroleum’s notes slipped.

The 6 5/8% senior notes due 2026 fell 1 point to close at 16¼ bid.

Airlines in focus

Elsewhere, United Airlines’ issues diverged in direction, traders said.

The 5% senior notes due 2024 shed 2 points to close at 80 bid. The 4¼% senior notes due 2022 tacked on ¼ point to close at 87¼ bid.

On Wednesday morning, the Chicago-based airline announced that it was preparing to send furlough notices 36,000 U.S.-based frontline employees.

The potential move would affect about 45% of the airline’s workforce.

Demand indicators are a leading indicator on how many of the furloughs would be carried out starting on Oct. 1, as coronavirus cases resurge in parts of the country.

The company said on Tuesday that it expected a near-term drop in net bookings as it seeks to add 25,000 to its international and domestic flight schedule.

Fort Worth-based carrier American Airlines’ paper was under pressure.

The 5% senior notes due 2022 declined by 3¾ points to close at 52¼ bid. The 3¾% senior paper due 2025 lost 6 points to close at 42½ bid.

Party City, L Brands off

In the retail space, Party City’s notes declined, market sources said.

The 6 1/8% senior notes due 2023 gave up 2½ points to close at 17 bid. The 6 5/8% senior notes due 2026 fell 1¼ points to close at 18½ bid.

The Elmsford, N.Y.-based party supplies chain announced early Wednesday that its common stock had regained compliance with the listing standards of the New York Stock Exchange.

The company had received a notice of potential delisting on April 9.

“The stock was ripping, but that didn’t really carry over to the bond side,” a trader said. “Those still traded a bit though.”

Last month, the company announced the beginning of an exchange offer for any and all of its 2023 notes and $500 million of its 2026 notes.

Columbus, Ohio-based department store name L Brands’ issues were pushed lower.

The 6¾% senior notes due 2036 shaved off ¼ point to close at 84¾ bid. The 5¼% senior notes due 2028 fell 1¼ points to close at 81¾ bid.

Diebold gains

Meanwhile, Diebold’s paper was spotted gaining ground, traders said.

The 8½% senior notes due 2024 shot up 5 points to close at 87 bid.

On Wednesday, the North Canton, Ohio-based connected commerce solutions company’s paper was active in the midst of its marketing of a dual-currency offering of five-year senior secured notes.

The offering includes a $690 million tranche and €350 million tranche.

With the proceeds, the company intends to repay the total outstanding under its term loan A facility and term loan A-1 facility and about $194 million of revolving credit loans.

Also, Diebold plans to amend its senior credit facility to extend the maturity of its revolving credit commitments and revolving credit loans to July 2023 from April 30, 2022.

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