PG&E notes rise after judge signals exit support; Chesapeake better in energy space

By James McCandless

San Antonio, June 16 – At the end of Tuesday’s activity, the distressed space focused on the utilities and energy sectors.

PG&E Corp.’s notes rose to higher levels after its bankruptcy judge signaled his support for the company’s bankruptcy exit plans.

In the energy space, Chesapeake Energy Corp.’s issues ended in a better position after announcing it had elected to forego an interest payment.

As oil futures posted gains, Occidental Petroleum Corp.’s and SM Energy Co.’s paper improved as Whiting Petroleum Corp.’s notes saw mixed activity.

Meanwhile, bankrupt tobacco name Pyxus International, Inc.’s issues varied in direction after a pair of ratings downgrades.

Car rental company Hertz Global Holdings, Inc.’s paper declined as the company pushes ahead with its plan to sell $500 million additional common stock.

Elsewhere, in air travel, United Airlines Holdings, Inc.’s notes were carried higher as American Airlines Group Inc.’s issues diverged.

PG&E rises

PG&E’s notes rose to higher levels as the day ended, traders said.

The 6.05% notes due 2034 jumped up 11 points to close at 120½ bid.

The notes saw about $51 million change hands.

During the Tuesday session, news broke that the bankruptcy judge in the San Francisco-based electric utility’s case is going to support the company’s restructuring plan, setting the stage for an emergence from Chapter 11 at the end of the month.

Judge Dennis Montali said in a hearing that he would approve the plan on Wednesday and hold another hearing on Friday to resolve details.

After the close on Monday, the utility launched a $1 billion five-year senior secured term loan B that is talked at Libor plus 450 basis points to 475 bps with a 1% Libor floor and an original issue discount of 98, Prospect News reported.

PG&E is in the middle of raising billions of dollars through public and private offerings to finance the exit, which is expected at the end of the month.

Chesapeake better

In the oil and gas space, Chesapeake Energy’s issues ended in a better position, market sources said.

The 7½% senior notes due 2026 gained 1½ points to close at 5¼ bid. The 11½% notes due 2025 pushed up 9½ points to close at 16 bid.

On Tuesday, the Oklahoma City-based independent oil and gas producer reported that it would be skipping an interest payment of about $10 million, triggering a 30-day forbearance period.

Reports indicated over the last few days that the company is preparing to file for bankruptcy as soon as this week with a deal that would prioritize senior lenders.

“They have about $9 billion that they’re on the hook for,” a trader said. “Word is that they’re looking for maybe $2 billion in DIP.”

Headlines about the company mulling bankruptcy have persisted since April after executing a reverse stock split.

Oil futures gain

As oil futures posted gains, distressed energy tranches trended positively, traders said.

West Texas Intermediate crude oil futures for July delivery tacked on $1.26 to settle at $38.38 per barrel.

North Sea Brent crude oil futures for August delivery finished up at $40.96 per barrel after a $1.24 lift.

Houston-based independent oil and gas producer Occidental Petroleum’s paper improved.

The 2.9% senior notes due 2024 improved by 4 points to close at 89½ bid. The 2.7% senior paper due 2022 garnered ¾ point to close at 94 bid.

SM Energy, another Houston-based producer, saw its notes move higher.

The 5 5/8% senior notes due 2025 tacked on 1½ points to close at 54½ bid. The 6 5/8% senior notes due 2027 grabbed 2 points to close at 54½ bid.

Denver-based peer Whiting Petroleum’s issues saw mixed activity.

The 6¼% senior notes due 2023 declined 2 points to close at 16 bid. The 6 5/8% senior notes due 2026 ticked up 1 point to close at 17½ bid.

Pyxus active, mixed

Meanwhile, tobacco name Pyxus’ paper varied in direction, traders said.

The 9 7/8% notes due 2021 fell 2 points to close at 11½ bid. The 8½% paper due 2021 shot up 5 points to close at 98 bid.

On the heels of its Monday Chapter 11 bankruptcy filing, the Morrisville, N.C.-based tobacco products producer received a pair of ratings downgrades from S&P Global Ratings and Moody’s Investors Service.

S&P and Moody’s both cut their respective issue-level ratings following the announcement while Moody’s affirmed a stable outlook.

The company and its Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC and GSP Properties, LLC subsidiaries made a pre-packaged Chapter 11 bankruptcy filing after coming to an agreement with its holders.

More than 92% in principal amount of its first-lien notes and more than 67% in principal amount of its second-lien notes are part of the deal.

Hertz notes decline

Hertz’s notes spent the session declining, market sources said.

The 6¼% senior notes due 2022 chalked off 1¾ points to close at 42 bid. The 5½% senior notes due 2024 lost 1¼ points to close at 42¾ bid.

The Estero, Fla.-based car rental company announced on Monday that it plans to sell up to $500 million in additional common stock.

After heightened retail investing in its stock, the name won court approval on Friday to issue up to $1 billion of additional shares.

In its offering filing with the SEC, the company stressed that the stock may be eventually worthless after its bankruptcy exit.

Airlines on the move

Elsewhere, in air travel, United Airlines’ issues were carried higher, traders said.

The 5% senior notes due 2024 jumped up 4 points to close at 87 bid. The 4¼% senior notes due 2022 rose 2½ points to close at 90 bid.

The Chicago-based airline’s structure has seen heightened positive activity over the last few trading days as the company works to secure around $5 billion in new capital to handle the pandemic.

The company is working to secure a $4.5 billion emergency loan from the federal government backed by its loyalty program and up to $1 billion from a common stock sale.

Fort Worth-based sector peer American Airlines’ paper differed.

The 3¾% senior notes due 2025 slipped ½ point to close at 59½ bid. The 5% senior paper due 2022 picked up 4½ points to close at 70½ bid.

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