California Resources notes up as energy receives boost; U.S. Steel lower on ratings cut

By James McCandless

San Antonio, April 3 – The week in distressed debt trading ended with a continued focus on energy names and others feeling the effects of the weakened economy.

California Resources Corp.’s notes rose with improving oil futures despite receiving a ratings downgrade.

Sector peer Antero Resources Corp.’s issues varied following its own ratings downgrade.

Following higher oil futures, Whiting Petroleum Corp.’s paper gained ground while Occidental Petroleum Corp.’s notes diverged.

Elsewhere, United States Steel Corp.’s issues declined as it faces its own slate of ratings downgrades.

Auto parts maker Tenneco Inc.’s paper dropped after the company announced pay cuts and suspends operations.

Meanwhile, in telecom, Digicel Group Ltd.’s notes tracked higher as the company seeks creditor approval for a restructuring.

Satellite operator Intelsat SA’s issues were pushed lower.

Real estate name WeWork Cos. Inc.’s paper continued to push upward a day after a large investor withdrew from a tender offer.

CalRes rises

California Resources’ notes were seen rising by the end of the day, traders said.

The 6% senior notes due 2024 picked up 2½ points to close at 6 bid. The 8% senior secured notes due 2022 improved by 2 points to close at 3 bid.

After the close on Thursday, the Los Angeles-based independent oil and gas producer received a ratings downgrade from Moody’s Investors Service.

The agency lowered the company’s corporate family rating and probability of default rating and several issue-level ratings.

Moody’s said that the downgrades reflect its view that there is an elevated risk for a restructuring and a bankruptcy filing after the name was unable to execute a debt exchange.

Last month, California Resources cancelled an exchange offer for three series of notes due to weakened market conditions.

Antero varies

Sector peer Antero Resources’ issues varied in direction, market sources said.

The 5 1/8% senior notes due 2022 fell 1½ points to close at 49 bid. The 5 5/8% senior notes due 2023 were lifted 4¼ points to close at 42½ bid.

Over the last 24 hours, the Denver-based producer was hit with ratings downgrades from Moody’s and Fitch Ratings.

Moody’s lowered the company’s corporate family rating, probability of default rating, speculative grade liquidity rating and senior unsecured notes rating, citing a deterioration in its credit profile that would increase its difficulty to refinance its maturities.

S&P Global Ratings and Moody’s also cut the ratings of closely related Antero Midstream Partners LP.

Futures up

As oil futures moved higher again, distressed energy tranches trended upward, traders said.

West Texas Intermediate crude oil futures for May delivery shot up $3.02 to cap the week at $28.34 per barrel.

North Sea Brent crude oil futures for June delivery finished at $34.11 per barrel after a $4.11 jump.

Denver-based bankrupt producer Whiting Petroleum’s paper gained ground.

The 6¼% senior notes due 2023 added 1¾ points to close at 10 bid. The 6 5/8% senior paper due 2026 tacked on 1¾ points to close at 10 bid.

Houston-based peer Occidental Petroleum’s notes diverged.

The 2.9% senior notes due 2024 rose 1½ points to close at 58 bid. The 2.7% senior notes due 2022 shaved off ½ point to close at 72½ bid.

“Right now there’s no deal on a global supply cut so this might be premature,” a trader said. “But the market’s hungry for good news.”

U.S. Steel declines

Elsewhere, U.S. Steel’s issues declined as Friday came to a close, market sources said.

The 6 7/8% senior notes due 2025 lost 3¼ points to close at 66¾ bid. The 6.65% senior notes due 2037 slid ¾ point to close at 57 bid.

The Pittsburgh-based steel manufacturer was another name to receive a ratings downgrade late in the week.

Fitch clipped the company’s long-term issuer default rating to B- from B+ and affirmed a negative outlook.

The agency argues that as steel end markets cut production due to market weakness, more uncertainty will permeate the economy.

Last week, the company announced that it would reduce its capital spending for the year by $125 million and idle some production facilities.

Tenneco drops

Automotive name Tenneco’s paper finished with a drop, traders said.

The 5% senior notes due 2026 dipped 4½ points to close at 50 bid.

Early Friday, the Lake Forest, Ill.-based auto parts maker became one of the latest names to announce cost cutting measures in the face of the coronavirus pandemic.

The company said that it would be suspending or reducing production at facilities worldwide, furloughing workers, trimming executive pay and reducing capital spending for 2020.

Concurrently, the company drew down $700 million under its $1.5 billion revolving credit facility, intending to further increase the revolver drawdown to about $1.2 billion to shore up cash, Prospect News reported.

Digicel higher

Meanwhile, in the telecom space, Digicel’s notes tracked higher, market sources said.

The 6% senior notes 2021 gained ¼ point to close at 61¼ bid.

The Kingston, Jamaica-based mobile network provider saw its ratings slashed by Fitch during the Friday session.

The company received an overall downgrade to C from CCC, while also receiving issue-level cuts while its subsidiaries were also cut.

On Wednesday, the company announced that it would seek creditor approval for a multi-level restructuring agreement.

Luxembourg-based satellite operator Intelsat’s issues were pushed lower.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 were docked 1 point to close at 14½ bid. The 9½% senior notes due 2023 fell 3½ points to close at 25¼ bid.

WeWork better

Real estate name WeWork’s paper continued to push upward, traders said.

The 7 7/8% senior notes due 2025 shifted up 1¼ points to close at 37¼ bid.

The New York-based coworking company’s structure saw a second day of positivity despite news out Thursday that major investor SoftBank had decided to withdraw from a tender offer to purchase $3 billion of stock.

The investment firm said that WeWork did not meet several conditions required for the deal to progress, including antitrust issues, pending criminal and civil investigations and market weakness attributed to the pandemic.

© 2015 Prospect News.
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