Occidental Petroleum sinks as ratings cut to junk; Party City lower in retail space

By James McCandless

San Antonio, March 19 – As equities saw positivity, the distressed debt space experienced non-cohesive movements with energy in focus.

Occidental Petroleum Corp.’s notes sunk after receiving junk status in a ratings downgrade as the energy sector feels pressure from lower oil prices.

As crude futures shifted higher, Whiting Petroleum Corp.’s issues diverged and Gulfport Energy Corp.’s paper slipped.

Retailer Party City Holdco Inc.’s notes tracked lower after receiving a ratings downgrade as the company temporarily closes retail locations.

Sector peer L Brands, Inc.’s issues varied in direction after announcing that it would temporarily halt online sales for its Victoria’s Secret unit.

Meanwhile, auto parts name Tenneco Inc.’s paper was active but unchanged after the company appointed an interim chief financial officer.

Retail REIT CBL & Associates Properties, Inc.’s notes saw mixed results at the end of the session.

Elsewhere, in telecom, Frontier Communications Corp.’s issues varied as Intelsat SA’s paper was under water.

Occidental sinks

Occidental Petroleum’s notes sunk by the end of the day, traders said.

The 6.2% senior notes due 2040 dropped 8½ points to close at 61½ bid. The 5.55% senior notes due 2026 declined by 15¾ points to close at 63¼ bid.

The two tranches combined to see about $52 million change hands.

Early Thursday, Moody’s Investors Service lowered the Houston-based independent oil and gas company’s senior unsecured rating to Ba1 from Baa3.

The agency also assigned a corporate family rating of Ba1, a probability of default rating of Ba1-PD and a speculative grade liquidity rating of SGL-3, Prospect News reported.

Ratings were placed on review for downgrade.

Moody’s said that the company’s $35 billion in debt hindered its financial flexibility in the face of the collapse of energy prices.

“It’s always been the case that lower prices would take down over-leveraged names, but the pace that it’s happening is new,” a trader said.

Oil futures higher

As crude oil futures shifted higher, distressed energy tranches saw varying trajectories, market sources said.

West Texas Intermediate crude oil futures for April delivery jumped up $4.85 to end the day at $25.22 per barrel.

North Sea Brent crude oil futures for May delivery hopped up $3.59 to close out at $28.47 per barrel.

Denver-based producer Whiting Petroleum’s issues diverged in direction.

The 6¼% senior notes due 2023 moved down 1½ points to close at 9 bid. The 6 5/8% senior notes due 2026 tacked on 2½ points to close at 10½ bid.

Oklahoma City-based peer Gulfport Energy’s paper finished weaker.

The 6% senior notes due 2024 were trimmed 2 points to close at 20 bid.

Party City lower

Retailer Party City’s notes tracked lower as Thursday reached the close, traders said.

The 6 5/8% senior notes due 2026 shed 4½ points to close at 17½ bid.

On Thursday, the Elmsford, N.Y.-based party supplies retailer received downgrades from S&P Global Ratings.

The agency lowered its overall rating to CCC+ from B, also trimming its term loan rating and senior notes rating.

S&P argued that the company would have a difficult time refinancing its debt at par as it faces weak operating prospects amid the pandemic following a weak fourth quarter.

The company announced on Wednesday that it would be temporarily closing all of its U.S. retail locations through March 31.

L Brands varies

Sector peer L Brands’ issues varied in direction, market sources said.

The 6¾% senior notes 2036 lost 1¼ points to close at 71¼ bid. The 5¼% senior notes due 2028 picked up 6½ points to close at 73½ bid.

In a filing with the Securities and Exchange Commission, the Columbus, Ohio-based retailer said that it would suspend e-commerce orders for its Victoria’s Secret and Pink brands, shifting focus to its Bath & Body Works unit with a priority on soaps and hand sanitizers.

The change is the company’s latest response to the pandemic after announcing on Tuesday that it would close all of its retail locations through March 29.

The retailer also drew down $950 million from a secured revolving credit facility, saying that it now has more than $2 billion in cash.

Concurrently, the company also withdrew its guidance for the first quarter.

“It is tough to say if this is a good idea,” a trader said. “Although, I don’t see a lot of people buying Victoria’s Secret these days at any rate.”

Tenneco active, flat

Meanwhile, automotive name Tenneco’s paper was active but ultimately unchanged, traders said.

The 5% senior paper due 2026 held level at 53¼ bid.

After the close on Wednesday, the Lake Forest, Ill.-based automotive parts producer announced that it had appointed long-time former executive Kenneth Trammel as its interim chief financial officer effective April 1.

The move comes after current CFO Jason Hollar accepted a position elsewhere.

The company said it was conducting a search for a permanent replacement.

In January, the company posted fourth-quarter earnings of 42 cents per share, weaker than the analyst consensus.

CBL mixed

Property name CBL’s notes ended the session with mixed results, market sources said.

The 5¼% senior notes due 2023 slid 5½ points to close at 28¾ bid. The 4.6% senior notes due 2024 bounced up 9¾ points to close at 30 bid.

The Chattanooga, Tenn.-based retail-focused real estate investment trust saw ratings downgrades from S&P and Moody’s on Wednesday in reaction to a recent slate of temporary store closures announced by national retail chains.

S&P slashed the company’s overall rating to CCC+ from B and cut its unsecured debt rating, citing an unsustainable capital structure under current conditions.

Moody’s lowered the company’s senior unsecured debt ratings, corporate family rating and speculative grade liquidity rating.

Intelsat down

Elsewhere, in the telecom space, Frontier’s issues varied, traders said.

The 10½% senior notes due 2022 dropped 4 points to close at 27 bid. The 11% senior notes due 2025 closed level at 26 bid.

In the coming weeks, the Norwalk, Conn.-based wireline communications name is expected to file for Chapter 11 bankruptcy after announcing earlier this week that it would skip about $322 million in interest payments.

The company is reportedly using its 60-day forbearance period to hold talks with creditors about its restructuring plan.

Luxembourg-based satellite operator Intelsat’s paper was under water.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 lopped off 5¼ points to close at 20¾ bid. Intelsat Jackson Holdings SA’s 8½% senior notes due 2024 trailed by 1½ points to close at 62 bid.

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