Occidental notes slip after early tender results; American Airlines lower in travel space

By James McCandless

San Antonio, Dec. 21 – The distressed debt market started the week softer, with energy and travel names in focus.

Occidental Petroleum Corp.’s notes slipped lower after the company gave early tender results for a five-series offering.

Amid a decline in oil futures, Antero Resources Corp.’s issues similarly weakened while SM Energy Co.’s and Callon Petroleum Co.’s paper varied in direction.

In the travel space, American Airlines Group Inc.’s and United Airlines Holdings, Inc.’s notes were both pushed lower amid headlines of Covid resurgence and upcoming stimulus news.

Specialty retail name L Brands, Inc.’s issues moved lower after the company announced a pair of executive hires to its Bath & Body Works division.

Sector peer Nordstrom, Inc.’s paper spent the session trailing.

Meanwhile, manufacturer United States Steel Corp.’s notes ended with mixed results as it moves through the next quarter on lower guidance.

Occidental slips

Occidental Petroleum’s notes slipped lower on Monday, traders said.

The 2.9% senior notes due 2024 shaved off ½ point to close at 95½ bid. The 2.7% senior notes due 2022 fell ¼ point to close at 100¼ bid.

On Monday morning, the Houston-based independent oil and gas producer announced early results of its cash offers for five series of notes, Prospect News reported.

So far, the company has accepted about $2.2 billion collectively of the notes listed in the tender offer.

In order to accommodate the orders the name raised its maximum purchase price to $2.3 billion from $2 billion, the second increase the offer has seen.

Despite the offers expiration date of 11:59 p.m. ET on Jan. 5, Occidental says it does not plan to accept any further tenders as the offer is fully subscribed.

The offers are being funded by a concurrent registered offering of senior unsecured notes.

Those notes priced at $2 billion in two parts on Dec. 8, which consisted of $750 million of five-year notes and $1.25 billion of 10-year notes.

Oil declines

Amid a sharp decline in oil futures, distressed energy tranches were somewhat weak, market sources said.

West Texas Intermediate crude oil futures for February delivery shed $1.27 to settle at $47.97 per barrel.

North Sea Brent crude oil futures for February delivery finished the afternoon at $50.91 per barrel after giving back $1.35.

Denver-based producer Antero Resources’ issues were similarly weaker.

The 5 1/8% senior notes due 2022 lost ¼ point to close at 99¾ bid. The 5% senior notes due 2025 were docked 1¼ points to close at 90½ bid.

SM Energy, another Denver-based E&P, saw its paper vary in direction.

The 5 5/8% senior paper due 2025 shot up 1¾ points to close at 79¾ bid. The 5% senior paper due 2024 declined by 3¼ points to close at 81 bid.

Houston-based producer Callon Petroleum’s notes were down and flat.

The 6 1/8% senior notes due 2024 were pushed down 1¼ points to close at 56¾ bid. The 6 3/8% senior notes due 2026 held level to close at 51½ bid.

AA, United lower

In the travel space, American Airlines’ issues were pushed lower, traders said.

The 5% senior notes due 2022 gave back 2 points to close at 88 bid. The 11¾% senior notes due 2025 lost 1 point to close at 114 bid.

During the Monday session, the Fort Worth-based air travel giant and others in the industry had negative attention amid headlines about a resurgent Covid-19 in a mutated strain.

Countries in Europe and in other parts of the world announced new travel restrictions to and from the United Kingdom as scientists identified a mutated strain of the coronavirus that was taking hold there.

The U.S. government is also considering the possibility of restricted U.K. travel.

On a more positive note, reports over the last 24 hours indicate that the sector is set to receive a new pandemic relief package from the U.S. government as part of the new stimulus bill.

Airlines are slated to receive $15 billion, lower than the initial talk of $17 billion and less than the initial round of $25 billion passed in March.

In reaction to the news, the name said on Monday that it was preparing to recall tens of thousands of employees that were furloughed after the first round of aid expired in October.

“I think the airlines are going to be hobbled for a while as long as the virus persists,” a trader said.

Chicago-based air carrier United Airlines’ paper also trended downward.

The 5% senior paper due 2024 chalked off ¾ point to close at 99¼ bid. The 4¼% senior paper due 2022 fell ½ point to close at 100½ bid.

L Brands diverges, Nordstrom trails

Retail name L Brands’ notes moved lower by the end of trading, market sources said.

The 6¾% senior notes due 2036 declined by ¼ point to close at 111½ bid. The 5¼% senior notes due 2028 dived 1¼ points to close at 104¼ bid.

Before the market opened on Monday, the Columbus, Ohio-based specialty retail company announced a pair of executive hires in its Bath & Body Works division.

The name appointed retail executive Julie Rosen as the unit’s new president and Deon Riley as its human resources chief.

In a statement, the segment’s chief executive officer Andrew Meslow said that the selections will support the continued growth of Bath & Body Works.

In L Brands’ third-quarter earnings report released last month, Bath & Body Works reported a 13% boost in sales.

Seattle-based department store Nordstrom’s issues trailed.

The 5% senior notes due 2044 dipped 1 point to close at 92¾ bid.

U.S. Steel mixed

Meanwhile, manufacturer U.S. Steel’s paper ended with mixed results, traders said.

The 6¼% senior paper due 2026 improved by 1¼ points to close at 92 bid. The 6.65% senior paper due 2037 shed 1¾ points to close at 83¼ bid.

Late last week, the Pittsburgh-based steelmaker issued updated guidance for the fourth quarter, tempering expectations.

The company expects to end the quarter with an earnings per share loss of 85 cents, wider than the consensus estimate of a 54 cent per share loss.

Adjusted EBITDA is expected in the $55 million range.

Despite the lower guidance, chief executive officer David Burritt said that December performance has been strong so far, driven by higher steel prices, better operations and continued focus on cost management.

© 2015 Prospect News.
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