Chesapeake Energy notes down as reverse stock split planned; L Brands lower with outlook

By James McCandless

San Antonio, April 13 – More shifting ground in the energy and retail sectors marked the distressed debt market as a new week started.

Chesapeake Energy Corp.’s notes trailed as the company prepared for a reverse stock split, which was enacted after the close.

Weakness in oil futures also spurred negativity in Occidental Petroleum Corp.’s, Whiting Petroleum Corp.’s and Antero Resources Corp.’s issues.

In the retail space, L Brands, Inc.’s paper was pushed lower after a ratings agency changed its outlook of the name to negative.

Sector peer Rite Aid Corp.’s notes saw positivity.

Meanwhile, in telecom, Intelsat SA’s issues were under pressure after the company withdrew its guidance and delayed its quarterly report.

Cloud networking name GTT Communications Inc.’s paper improved despite receiving a ratings downgrade.

Utilities provider PG&E Corp.’s notes fell as the company starts to gather votes for its restructuring plan.

Chesapeake trails

Chesapeake Energy’s notes trailed during the Monday session, traders said.

The 11½ senior notes due 2025 lost 2¼ points to close at 12¼ bid.

After the Thursday close, the Oklahoma City-based independent oil and gas producer announced that it would vote on a reverse stock split on Monday in order to meet New York Stock Exchange regulations.

The proposed range of the split was of one to 50 to one to 200 shares.

Late Monday, the board of directors voted for a one to 200 reverse stock split, taking effect at the end of Tuesday and with trading commencing on Wednesday.

The company’s shares outstanding will be reduced to 9.784 million shares.

Last month, the company hired restructuring advisers to tackle its $9 billion in debt.

“I’d say they are the next candidate for a restructure,” a trader said.

Oil names weaken

Weakness in oil futures led to negativity in distressed energy names, market sources said.

West Texas Intermediate crude oil futures for May delivery chipped off 35 cents to settle at $22.41 per barrel.

North Sea Brent crude oil futures for June delivery rose to $31.74 after a 26 cent gain.

Houston-based oil and gas producer Occidental Petroleum’s issues were negative.

The 2.9% senior notes due 2024 slid 5¼ points to close at 77¼ bid. The 2.7% senior notes due 2022 fell 2½ points to close at 86 bid.

The two tranches combined to see about $36 million change hands.

Denver-based peer Whiting Petroleum’s paper followed the overarching trend.

The 6¼% senior notes due 2023 shaved off ¼ point to close at 10½ bid. The 6 5/8% senior notes due 2026 dropped ½ point to close at 10¼ bid.

Antero Resources, another Denver-based producer, saw its notes take a spill.

The 5 1/8% senior notes due 2022 were docked 3¼ points to close at 56¾ bid. The 5 5/8% senior notes due 2023 moved lower by 1½ points to close at 46 bid.

L Brands lower

In the retail space, L Brands’ issues were pushed lower, traders said.

The 6¾% senior notes due 2036 declined by 2¾ points to close at 77 bid. The 5¼% senior notes due 2028 weakened by 3 points to close at 72 bid.

During the Monday session, the Columbus, Ohio-based retailer received an outlook change from Moody’s Investors Service.

The agency changed its outlook to negative and affirmed all of the company’s ratings.

Moody’s said that the revised outlook is based on the company’s decision to close its Victoria’s Secret and Bath & Body Works retail locations due to the coronavirus pandemic, estimating the impact at a 40% reduction of EBITDA.

Earnings are expected to recover in 2021, though possibly not at the level to support leverage reduction.

Camp Hill, Pa.-based drug store chain Rite Aid’s paper saw positivity.

The 6 1/8% senior notes due 2023 picked up 2 points to close at 92 bid.

Intelsat down

Meanwhile, in telecom, Intelsat’s notes were under pressure, market sources said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 shed ¾ point to close at 16¾ bid. Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 trailed by 4½ points to close at 59½ bid.

Late in the day on Thursday, news broke that the Luxembourg-based company has withdrawn its guidance for the fiscal year and subsequent years due to the Covid-19 outbreak.

It also delayed its quarterly report to June, which was expected originally in May.

Last week, reports indicated that the company is exploring relocation cost financing for its anticipated auctioning off of C-band spectrum.

At the same time, the company’s bondholders are reportedly hiring advisers to prepare for potential restructuring talks.

“Oil has taken center stage so this weakness in telecom has gone relatively under the radar,” a trader said.

GTT gains

Cloud computing name GTT Communications’ issues moved into a better position, traders said.

The 7 7/8% senior notes due 2024 added 3¼ points to close at 62¼ bid.

On Monday morning, the McLean, Va.-based cloud networking services provider received a blanket ratings downgrade from S&P Global Ratings.

The agency cut all of the company’s ratings to CCC+ from B- and affirmed a negative outlook.

S&P argues that the name’s capital structure may become unsustainable over time due to its potential inability to expand its earnings and reduce leverage.

PG&E falls

Utilities provider PG&E’s paper fell throughout the day, market sources said.

The 6.05% bonds due 2034 moved down 6½ points to close at 101 bid.

Last week, the San Francisco-based bankrupt electric utility announced that it has received statements of continued support for its settlement agreement with wildfire victims and plan of reorganization.

On the cusp of soliciting votes for its restructuring plan, the company said that the company would emerge from Chapter 11 as a financially sound utility positioned to pay victims and protect customers.

Recently, the judge in its bankruptcy case ruled that there would be no delays in the restructuring vote.

The company is seeking a bankruptcy exit by June 30 in order to participate in California’s wildfire victims fund.

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