CalRes notes diverge after bankruptcy; American Airlines eyed in travel space

By James McCandless

San Antonio, July 17 – At the end of the week in the distressed debt market, energy and travel paper saw the lion’s share of the attention.

California Resources Corp.’s notes diverged in direction in the wake of its bankruptcy filing.

While oil futures were under pressure, Whiting Petroleum Corp.’s and Chesapeake Energy Corp.’s issues improved while Occidental Petroleum Corp.’s paper saw mixed results.

Elsewhere, in the travel space, American Airlines Group Inc.’s notes moved on separate paths after warning of mass furloughs

Sector peer United Airlines Holdings, Inc.’s issues varied.

Meanwhile, air and rail builder Bombardier Inc.’s paper rose after news broke of a new contract for railcars in California.

In the telecom space, iHeartMedia, Inc.’s notes differed a day after the company repaid the outstanding amount under its credit facility.

Satellite operator Frontier Communications Corp.’s issues slipped.

CalRes diverges

California Resources’ notes diverged in direction on Friday, traders said.

The 8% notes due 2022 picked up 1½ points to close at 3 bid. The 6% senior notes due 2024 lost 1½ points to close at 1 bid.

In the wake of the Los Angeles-based independent oil and gas producer’s bankruptcy filing, the company received a ratings downgrade from Moody’s Investors Service.

The agency cut its probability of default rating, corporate family rating and issue-level ratings.

After the Wednesday close, the name announced a pre-packaged bankruptcy filing after coming to a restructuring agreement with holders of 84% of its 2017 term loans, 51% of its 2016 term loans and Elk Hills midstream joint venture partner Ares Management LP.

California Resources says that the deal would significantly cut its debt load and the company has received commitments for $1 billion in debtor-in-possession financing.

Oil names trend up

While oil futures were under pressure, distressed energy tranches trended largely upward, market sources said.

West Texas Intermediate crude oil futures for September delivery chalked off 18 cents to cap the week at $40.75 per barrel.

North Sea Brent crude oil futures for September delivery ended the day at $43.14 per barrel after shedding 23 cents.

Denver-based producer Whiting Petroleum’s issues improved.

The 6¼% senior notes due 2023 grabbed 1 point to close at 19¼ bid. The 6 5/8% senior notes due 2026 shifted up 1 point to close at 19 bid.

Oklahoma City-based E&P Chesapeake Energy’s paper also picked up steam.

The 7% senior paper due 2024 rose ½ point to close at 4½ bid. The 4 7/8% senior notes due 2022 garnered ½ point to close at 3¾ bid.

Houston-based peer Occidental Petroleum’s notes saw mixed results.

The 2.9% senior notes due 2024 improved by ½ point to close at 91¼ bid. The 2.7% senior notes due 2022 were docked ½ point to close at 95¼ bid.

AA, United both vary

Elsewhere, in the travel space, American Airlines’ issues moved along separate paths, traders said.

The 5% senior notes due 2022 gained 1½ points to close at 58 bid. The 3¾% senior notes due 2025 dropped 1 point to close at 45¼ bid.

This week, the Fort Worth-based air carrier sent out 25,000 potential furlough notices to its frontline workers.

The furloughs would take effect in October, when the U.S. government’s payroll assistance is set to end.

The name has projected a 25% reduction in its international capacity through 2021.

“Airlines are going to be tricky for a year or so,” a trader said. “The level of confidence here will take a while to rebuild.”

Chicago-based sector peer United Airlines’ paper varied in direction to settle the week.

The 5% senior paper due 2024 gave back ½ point to close at 80 bid. The 4¼% senior paper due 2022 closed level at 85¼ bid.

Bombardier rises

Meanwhile, air and rail name Bombardier’s notes were on the rise, market sources said.

The 7½% senior notes due 2025 picked up ½ point to close at 72 bid. The 8¾% senior notes due 2021 added ¼ point to close at 91½ bid.

Towards the end of the day on Thursday, reports indicated that the Montreal-based manufacturer had won a $43 million contract to construct 11 railcars for a transit system in southern California.

Construction is expected to start in October 2021 with deliveries expected in the fall of 2022.

After shuttering its facilities in Europe and Canada to comply with government mandates at the onset of the coronavirus, the company has slowly restored construction capacity.

iHeart differs, Frontier down

In the telecom space, iHeartMedia’s issues differed in direction, traders said.

The 8 3/8% senior notes due 2027 gave up ¼ point to close at 97½ bid. The 6 3/8% senior notes due 2026 improved by ½ point to close at 104¾ bid.

The San Antonio-based media company told the Securities and Exchange Commission that it repaid the entire $235 million outstanding under its asset-based credit agreement from a new term loan.

Norwalk, Conn.-based wireline communicator Frontier’s paper slipped to lower levels.

The 10½% senior paper due 2022 dipped ½ point to close at 34 bid. The 11% senior paper due 2025 lost ¼ point to close at 34¼ bid.

© 2015 Prospect News.
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