American Airlines notes rise as federal aid expires; Callon jumps after royalty sale

By James McCandless

San Antonio, Oct. 1 – Bond issuers in the travel and energy sectors were the focus of secondary trading on Thursday.

American Airlines Group, Inc.’s notes rose despite federal payroll aid for the industry expiring and the company enacting furloughs.

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

In the oil and gas space, Callon Petroleum Co.’s paper jumped after the company announced it had sold a royalty interest.

Occidental Petroleum Corp.’s notes improved after announcing the sale of assets in Colombia to a private equity firm.

Despite a negative session for oil futures, Superior Energy Services’ and Antero Resources Corp.’s issues gained.

Meanwhile, AMC Entertainment Holdings, Inc.’s paper varied in direction as the company announced plans to open more theaters.

In manufacturing, Bombardier Inc.’s notes diverged amid concerns about the prospective closing on the sale of its aerostructures unit.

Iron ore miner Cleveland-Cliffs Inc.’s issues yielded mixed results in the wake of its acquisition news.

Airlines in focus

American Airlines’ notes rose through the Thursday session, traders said.

The 11¾% senior notes due 2025 gained ¾ point to close at 97¾ bid.

On Thursday, the Fort Worth-based air carrier’s structure ended on a positive note despite the expiration of the U.S. government’s $25 billion in payroll aid for the industry.

Early in the day, the company announced that it would furlough 19,000 of its workers this month, promising to reverse the move if more aid is passed.

After the close on Wednesday, Fitch Ratings issued a ratings downgrade, trimming American’s overall rating to B- from B.

The agency cited the company’s heavy debt load while demand for air travel will remain subdued in the near future.

The airline recently secured a $5.5 billion loan from the Treasury department to bolster its liquidity as it awaits further assistance.

Chicago-based sector peer United Airlines’ issues declined.

The 5% senior notes due 2024 shaved off ¼ point to close at 88 bid. The 4¼% senior notes due 2022 lost ¾ point to close at 92¾ bid.

Callon jumps

In the oil and gas space, Callon Petroleum’s paper jumped higher, market sources said.

The 6 1/8% senior notes due 2024 hopped up 6 points to close at 34¾ bid. The 6¼% senior notes due 2023 shot up 11¾ points to close at 44 bid.

Early Thursday morning, the Houston-based independent oil and gas producer announced that it entered into an overriding royalty interest transaction with Kimmeridge Energy, an energy-focused private equity firm, which generated gross cash proceeds of $140 million, Prospect News reported.

The company also issued $300 million of second-lien secured notes to Kimmeridge.

Both moves are part of the company’s plan to reduce borrowings under its credit facility to $1 billion, a reduction of nearly one-third.

Concurrently, Callon said it also recently entered into a definitive agreement to sell substantially all of its non-operated assets for gross cash proceeds of $30 million.

Occidental improves

Meanwhile, Occidental Petroleum’s notes were seen improving, traders said.

The 2.9% senior notes due 2024 grabbed 1 point to close at 85 bid. The 2.7% senior notes due 2022 added 1 point to close at 94½ bid.

The Houston-based oil and gas producer announced on Thursday that it had reached an agreement to sell its onshore assets in Colombia to private equity firm Carlyle Group for $825 million.

Of the amount, $700 million will be paid up front, with the remainder payable subject to certain production and commodity price targets.

The deal, expected to close in fourth-quarter 2020, includes operations and working interests in the Llanos Norte, Middle Magdalena and Putumayo Basins.

Oil names gain

Despite a negative session for oil futures, distressed energy names gained ground, market sources said.

West Texas Intermediate crude oil futures for November delivery fell $1.50 to finish the day at $38.72 per barrel.

North Sea Brent crude oil futures for December delivery closed at $40.93 per barrel after slipping $1.37.

Houston-based oilfield services company Superior Energy’s issues ended at better levels.

The 7 1/8% senior notes due 2021 tacked on 4 points to close at 30 bid. The 7¾% senior notes due 2024 leaped up 5½ points to close at 29 bid.

Denver-based peer Antero Resources’ paper also trended upward.

The 5 1/8% senior notes due 2022 rose ¼ point to close at 83 bid. The 5 5/8% senior notes due 2023 garnered ¾ point to close at 73¼ bid.

AMC varies

Meanwhile, theater chain AMC’s notes varied in direction, traders said.

The 10½% notes due 2026 chalked off ¼ point to close at 72 bid. The 12% notes due 2026 shifted up ½ point to close at 29 bid.

After the close on Wednesday, the Leawood, Kan.-based movie theater operator announced that it would reopen 14 theaters in California and Michigan on Oct. 2 and Oct. 9, respectively.

With those openings, the company will have more than 80% of its locations open after temporarily shuttering them to meet government mandates concerning the coronavirus pandemic.

Last month, AMC started an at-the-market offering for up to 15 million shares of common stock, with share prices to be set over time at the discretion of the bookrunners.

Also last month, AMC completed an initiative to reopen 70% of its brick-and-mortar locations.

Bombardier diverges

In manufacturing, Bombardier’s issues diverged, market sources said.

The 7½% senior notes due 2025 were docked ¼ point to close at 75 bid. The 7 7/8% senior notes due 2027 closed level at 74¼ bid.

The Montreal-based air and rail manufacturer’s structure was under some pressure in the wake of reports about the prospective sale of its aerostructures unit.

The prospective buyer, Spirit AeroSystems Holdings, Inc., said that the deal may not close by the Oct. 31 deadline.

The nixing of the $500 million transaction could lead to litigation between the two parties.

Cleveland-Cliffs mixed

Elsewhere, in the iron space, Cleveland-Cliffs’ paper yielded mixed results, traders said.

The 6¼% senior paper due 2040 moved up 2½ points to close at 79½ bid. The 5 7/8% senior paper due 2027 closed level at 93¼ bid.

The market continues to react to the Cleveland-based iron ore miner’s $1.4 billion acquisition of a competitor this week and subsequent ratings actions.

Responding to the news, Moody’s Investors Service placed all of its ratings on review for downgrade, saying that the review would focus on operational efficiencies and production optimization.

Subsequently, Fitch Ratings changed its outlook on the name to positive from negative.

© 2015 Prospect News.
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