Oil drops sharply, as do California Resources, Pacific Drilling; Petsmart down as acquisition details murky

By Colin Hanner

Chicago, April 19 – As crude oil futures were battered in the commodities market on Wednesday, distressed exploration and production companies were quick to follow, traders said, led in volume by California Resources Corp.

“Oil was getting whacked late,” a trader said, with West Texas Intermediate crude dropping near 2% on the session.

Transocean Ltd. and Pacific Drilling Co. were down on the day, as well.

After headlines of acquiring Chewy Inc. on Tuesday, Petsmart Inc. bonds were down on Wednesday, a trader said, perhaps in part to details starting to come to light on a deal that has otherwise remained vague.

Pharmaceuticals continued to drag, traders said, though Valeant Pharmaceuticals International, Inc. narrowed the losses and was unchanged in an issue. Concordia International Corp. was mixed, though volume was low.

One-off names made up the remainder of trading, a trader said, with Walter Investment Management Corp. posting a several-point gain, iHeartCommunications, Inc. inching higher and a pair of retailers not moving much, if at all.

Oil’s sharp dive

According to data from the Energy Information Agency, U.S. crude refinery inputs increased 241,000 barrels per day last week, yet another steep increase in supplies.

California Resources’ 8% notes due 2022 were down 1½ points to 77½, traders said.

In addition to the sharp downturn of oil, California Resources announced it has entered a joint venture with Macquarie Infrastructure and Real Assets to invest up to $300 million in oil and gas properties in California, particularly in the San Joaquin Basin, a news release said.

Offshore drilling contractor Transocean’s 6.80% notes due 2038 were down 7/8 point to 79½.

Offshore ultra-deepwater driller Pacific Drilling’s 5 3/8% notes due 2020 were down 3 points to 48.

Oklahoma City, Okla.-based oil and natural gas exploration company Continental Resources, Inc.’s 4.90% notes due 2044 were unchanged at 86.

And Plano, Texas-based oil and natural gas exploration company Denbury Resources Inc.’s 6 3/8% notes due 2021 were down ½ point to 81½.

Electric moves

Houston-based electric company Dynegy Inc.’s 7 5/8% notes due 2024 were down 1 point to 90.

And GenOn Energy, Inc.’s 9 7/8% notes due 2020 were unchanged at 67.

Petsmart down

Petsmart’s 7 1/8% notes due 2023 were up as high as 95 before coming back down to a 94-zip code, a trader said.

As the bonds continue to drop, the reason could be intertwined with the vagueness of the Chewy acquisition.

“I don’t know if it’s because there are more details coming out about how they’re going to pay for this Chewy acquisition,” the trader said. “I think they’re going to be funding with a bunch of debt, so people are going to be concerned about piling on more debt and levering up the cap structure a little bit.”

Pharma mixed

In comparison to Tuesday’s downtrodden session brought on by Cardinal Health, Inc. announcing it was lowering expectations for its guidance range because of anticipated fourth-quarter results due to falling drug prices, Valeant and Concordia dragged less on Wednesday.

Valeant’s 6 1/8% notes due 2025 were its sole unchanged issue, which finished at 73¾.

Its 5 3/8% notes due 2020 were down ¼ point to 84 7/8.

And the 6 3/8% notes due 2020 were down 3/8 point to 85¾.

Concordia’s 7% notes due 2023 were up ½ point to 16½.

And its 9½% notes due 2022 were down 2 points to 18½, though only on one trade, a trader said.

Mixed paper

Two printing and packaging companies were a mixed bag on the session, a trader said.

Packaging provider PaperWorks Industries, Inc.’s 9½% notes due 2019 were up ¼ point to 76½

And printer Cenveo Inc.’s 6% notes due 2019 were down 1 point to 81½.

Distressed wrap-up

One of the day’s biggest movers was Walter Investment Management Corp.’s 7 7/8% notes due 2021, which were up 3¾ points to 61¾.

San Antonio-based broadcasting and outdoor advertising giant iHeartCommunications’ 9% notes due 2021 were up 3/8 point to 78.

Global offshore shipper Navios Maritime Holdings Inc.’s 7 3/8% notes due 2022 were up ½ point to 84½.

Tween retailer Claire’s Stores Inc.’s 9% notes due 2019 were unchanged at 43½.

And J.C. Penney Co., Inc.’s 6 3/8% notes due 2036 were down ¼ point to 75¾.

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