Bombardier notes jump on purchase agreement; Transocean eyed in energy space

By James McCandless

San Antonio, Sept. 16 – At the week’s midpoint, the distressed debt session turned its focus to manufacturing and energy names.

Bombardier, Inc.’s notes jumped upward on news that the company had reached a purchase agreement to sell its rail unit.

In the oil and gas space, Transocean Ltd.’s issues varied in direction after an analyst downgraded the company and its common stock.

As oil futures saw an improvement, SM Energy Co.’s paper followed while Antero Resources Corp.’s Occidental Petroleum Corp.’s notes diverged.

Meanwhile, retail name L Brands, Inc.’s issues declined as the company brought a $1 billion offering of senior notes to market.

Sector peer Revlon, Inc.’s paper was under water.

Air carrier American Airlines Group, Inc.’s notes were positive while United Airlines Holdings, Inc.’s issues showed mixed activity as the sector renewed its push for more federal aid.

Bombardier improves

Bombardier’s notes jumped upward as Wednesday came to an end, traders said.

The 6% senior notes due 2022 shot up 7¾ points to close at 92½ bid. The 7 7/8% senior notes due 2027 added 5¼ points to close at 74½ bid.

About $37 million of the two tranches combined were on the tape.

On Wednesday, news broke that the Montreal-based air and rail manufacturer has finalized a purchase agreement for its rail segment.

The company has agreed to sell the division to French counterpart Alstom for about $4 billion, $350 million less than what was originally expected.

Under the recently revised deal, the segment was valued at $8.4 billion, with significant debt issues.

The terms of the agreement were recently revised after Bombardier released its second-quarter earnings results, making a weaker-than-expected showing.

“The structure is up because the deal got done and the price is not bad,” a trader said. “There was some uncertainty when Alstom said that those earnings would affect the deal.”

The deal is expected to close in the first quarter of 2021.

Recently, Bombardier has outlined layoffs in its Canadian and European facilities.

Transocean varies

In the oil and gas space, Transocean’s issues varied in direction, market sources said.

The 6.8% senior notes due 2038 shaved off ½ point to close at 15¾ bid. The 7½% senior notes due 2031 picked up 1¾ points to close at 15¾ bid.

The Steinhausen, Switzerland-based contract driller’s structure was eyed after the company received an analyst downgrade.

In a note, an analyst at Susquehanna said that the company is not immune to the challenges faced by the offshore industry.

The analyst elaborated that while Transocean is better positioned than some, it is not totally shielded from “weak demand and substantial excess capacity.”

The price target for Transocean’s common stock was also cut.

Recently, the company accepted $1.51 billion in tenders in an 11-series tender offer.

Oil names trend up

As oil futures saw an improvement, distressed energy names took different tracks, traders said.

West Texas Intermediate crude oil futures for October delivery hopped up $1.88 to close at $40.16 per barrel.

North Sea Brent crude oil futures for November delivery settled at $42.22 per barrel after a $1.69 pickup.

Denver-based independent oil and gas producer SM Energy’s paper followed futures upward.

The 6 1/8% senior notes due 2022 rose 1¾ points to close at 77 bid.

Antero Resources, another Denver-based producer, saw its notes diverge.

The 5 1/8% senior notes due 2022 held level to close at 85 bid. The 5 5/8% senior notes due 2023 grabbed 1½ points to close at 76¾ bid.

Houston-based E&P Occidental Petroleum’s issues drifted apart.

The 2.9% senior notes due 2024 tacked on 2¾ points to close at 88¾ bid. The 2.7% senior notes due 2022 shed ¼ point to close at 95¼ bid.

L Brands, Revlon off

Meanwhile, retail name L Brands’ paper spent the session in decline, market sources said.

The 6¾% senior notes due 2036 gave back 2¼ points to close at 98¾ bid. The 5¼% senior paper due 2028 dipped ¼ point to close at 96½ bid.

In a Wednesday drive-by, the Columbus, Ohio-based specialty store name priced an upsized $1 billion issue of 10-year senior notes at par to yield 6 5/8%, Prospect News reported.

The issue size was increased from an initial $750 million.

With the proceeds, the company plans to fund tender offers for its 5 5/8% senior notes due 2022, its 5 5/8% senior notes due 2023, its 7.6% senior notes due 2037 and its 6.95% exchange debentures due 2033, with any remaining proceeds to be used to repay other outstanding debt.

The early tender deadline is 5 p.m. ET on Sept. 29 with the offer expiring at 11:59 p.m. ET on Oct. 14.

New York-based cosmetics name Revlon’s notes were under water.

The 5¾% senior notes due 2021 dropped ½ point to close at 32 bid.

Airlines in focus

Air carrier American Airlines’ issues were positive, traders said.

The 5% senior notes due 2022 rose 1¾ points to close at 70¼ bid. The 11¾% senior notes due 2025 pushed up ¼ point to close at 98½ bid.

Several members of the aviation industry, including the Fort Worth-based airline, made a renewed push for the federal government to pass more payroll aid before the current round expires.

In a letter to members of Congress, chief executive officer Doug Parker and seven airline unions pushed for more government assistance before the current funds expire on Oct. 1.

Parker noted that about 20,000 of the company’s workers are at risk of furlough without the payroll protection.

A measure for a second round of aid has been proposed in the Senate, though negotiations are at a standstill.

Chicago-based peer United Airlines’ paper showed mixed activity.

The 5% senior notes due 2024 gained 1 point to close at 91¾ bid. The 4¼% senior paper due 2022 chalked off ½ point to close at 94 bid.

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