The outstanding Dominion 3.071% 2024
was trading around a G-spread of 205bp,
according to MarketAxess data.
“Energy names are trading down quite a
BITûANDû)ûTHINKûANYûBIDSûRIGHTûNOWûAREûVERYû
THINûANDû;ITS=ûVERYûDIFlCULTûTOûMOVEûSIZEABLEû
[amounts of] energy paper,” Nolan said.
“I hope this helps set some foundation for
other issuers.”OCCIDENTAL’S LEVERAGE PROVES
BURDENSOME AS MOODY’S CUTS TO JUNKMoody’s downgraded OCCIDENTAL PETROLEUM
to Ba1 from Baa3 on Wednesday night,
GIVINGûTHEûHIGHLYûLEVERAGEDûENERGYûNAMEûITSû
lRSTûJUNKûRATINGûANDûDEMONSTRATINGûTHATû
ratings agencies are taking swift action as
the sector comes under pressure.
Occidental remains in the high-grade
index thanks to a BBB rating from S&P, but
market participants are closely watching for
another cut that would send its US$35bn of
outstanding debt fully to high-yield.
7ESTû4EXASûCRUDEûFELLûTOûJUSTûOVERû53ûAû
barrel on Wednesday – an 18-year low –
WHICHûCAUSEDûAVERAGEûHIGH
GRADEûENERGYû
CREDITûSPREADSûTOûBLOWûOUTûBPûWIDERûYEAR
TO
DATEûTOûBPûOVERû4REASURIES ûACCORDINGû
to ICE BofA data.
Energy names tested the primary bond
MARKETûONû4UESDAYûBUTûEVENûOILûANDûGASû
giant Exxon was forced to pay up.
Occidental was quickly noted as a fallen
ANGELûCANDIDATEûBYûTHEûMARKET ûGIVENûTHATûITû
LEVEREDûUPûSIGNIlCANTLYûLASTûYEARûWHENûITû
bought ANADARKO PETROLEUM at the height of
the oil market.
h/CCIDENTALû0ETROLEUMSû!UGUSTûû
acquisition of Anadarko Petroleum
Corporation (Anadarko) continues to burden
THEûCOMPANYSûBALANCEûSHEETûWITHûOVERû
US$35bn of debt and US$10bn of preferred
STOCK ûSIGNIlCANTLYûCOMPROMISINGûITSû
lNANCIALûmEXIBILITYûTOûCONFRONTûTHEûCOLLAPSEû
INûOILûPRICES vû!NDREWû"ROOKS û-OODYSûVICE
president, said in the report.
“While OXY has made progress capturing
acquisition synergies, and is itself a low-cost
OPERATORûWITHûATTRACTIVEû0ERMIANû"ASINû
acreage, projected asset sales required for
DEBTûREDUCTIONûHAVEûSLOWEDûANDûFACEû
considerable headwinds in a challenged oil
ANDûNATURALûGASûPRICEûENVIRONMENT ûLEAVINGû
/89ûWITHûAûSIGNIlCANTLYûWEAKENEDûCREDITû
PROlLEûWHOSEûPROSPECTSûFORûNEAR
TERMû
IMPROVEMENTûAREûUNCERTAINvû
Prior to the drop in oil prices, Occidental
warned that the timing of the roughly
US$4.1bn sale of its Ghana and Algeria
assets remained uncertain.
Some US$10bn–$15bn of asset sales were
THEûBASISûOFûITSûDELEVERAGINGûPLANûTHATûWOULDû
help pay off debt. The company has closed
53BNûOFûASSETûSALESûTOûDATEûThe asset sales were meant to help pay
down Occidental’s 10-part US$13bn bond it
PRICEDûLASTûYEARû)TûWASûTHEûlFTHûLARGESTûDEALû
OFû ûACCORDINGûTOû)&2ûDATAû
#REDIT3IGHTSûSAIDûTHEûNEWûENVIRONMENTû
for oil and gas means Occidental’s hedged
LEVERAGEûCOULDûREMAINûABOVEûSIXûTIMESûDEBTû
to Ebitda.
If the West Texas Intermediate price were
to remain around US$25 a barrel, the
COMPANYSûLEVERAGEûWOULDûGROWûTOûû
times debt to Ebitda, according to stress
tests conducted by CreditSights.
4HATûHEIGHTENEDûLEVERAGEûISûEVENûTAKINGû
INTOûACCOUNTûANûûDIVIDENDûCUTûANDûû
capex reduction Occidental announced
EARLIERûTHISûMONTH ûWHICHûADDEDû53BNû
INûCASHûSAVINGSûTOûITSûBALANCEûSHEETû
4HEûCOMPANYûHOPEDûTHOSEûMOVESûMIGHTû
STAVEûOFFûAûRATINGSûCUT ûBUTû-OODYSûMOVEDû
quickly to a downgrade nonetheless.
h-OODYSûPROVIDEDûAûQUICKûANSWERûTOûHOWû
MUCHûTIMEûCANûTHEûûDIVIDENDûCUTûANDû
32% capex cut buy them,” CreditSights
wrote in its report.FORD TO DRAW US$15bn CREDIT LINE,
SUSPENDS DIVIDENDFORD MOTOR COMPANY said on Thursday it
would draw down US$15.4bn across two
credit lines and that it would suspend
DIVIDENDûPAYMENTS ûTOûHELPûOFFSETûTHEû
working capital impact of the spread of
CORONAVIRUS
The automaker said it would draw
US$13.4bn under its corporate credit facility
and US$2bn under its supplemental credit
facility.
Ford joins a growing list of companies
SINCEûTHEûCORONAVIRUSûPANDEMICûTHATûHAVEû
either drawn down or said they would draw
down cash lines of credit.
Ford’s announcement is the largest seen
so far.
!SûWELLûASûSUSPENDINGûITSûDIVIDEND ûITûHASû
WITHDRAWNûlNANCIALûGUIDANCEûTHATûWASû
issued on February 4 in light of the
UNCERTAINTIESûINûTHEûBUSINESSûENVIRONMENTû
BECAUSEûOFûTHEûVIRUS
The company’s nearest maturing bond, its
ûS ûTIGHTENEDûBPûTOûBPû
OVERû4REASURIESûINûTRADINGûONû4HURSDAY û
although the notes were at 185bp as
recently as March 5, according to
MarketAxess.
Earlier in the week, Ford said it would
temporarily suspend production at plants in
THEû53ûANDû%UROPE ûSTARTINGûONû&EBRUARYû
h7HILEûWEûOBVIOUSLYûDIDNTûFORESEEûTHEû
CORONAVIRUSûPANDEMIC ûWEûHAVEûMAINTAINEDû
a strong balance sheet and ample liquidity
so that we could weather economic
UNCERTAINTYûANDûCONTINUEûTOûINVESTûINûOURû
future,” Ford CEO Jim Hackett said.The split-rated company has more than
53BNûOFûDEBTûANDûHOLDSûAûJUNKû"AûRATINGû
from Moody’s and a BBB– rating from S&P.
S&P said earlier this month that Ford’s
weak fourth quarter and bleak 2020 outlook
added more uncertainty to its ratings, with
the company seen as a strong fallen angel
candidate.PEPSICO ACCESSES BOND MARKET
FOLLOWING SLEW OF ACQUISITIONSPEPSICOûLAUNCHEDûAû53BNûSIX
PARTûBONDû
into an uncertain market last Tuesday
following a string of acquisitions.
The company has inked at least three
BOLT
ONû-!ûDEALSûSINCEûMID
ûINCLUDINGû
the US$1.7bn purchase of South African
food company PIONEER FOODS, a US$705m
acquisition of Chinese e-commerce snack
company HANGZHOU HAOMUSI FOOD and, most
recently, the US$3.85bn acquisition of
ROCKSTAR ENERGY drinks.
Together, those amount to some US$7bn
of acquisitions at rich multiples, according
to a Moody’s report.
PepsiCo was issuing into an extremely
VOLATILEûMARKET ûANDûTHEûBONDSûSTARTEDûOUTû
WITHûSOMEûBPnBPûOFûNEWûISSUEû
concessions at initial price thoughts,
according to CreditSights.
Bookrunners Bank of America, Citigroup and JP
Morgan tightened spreads 15bp–30bp through
price progression. Use of proceeds is slated for
general corporate purposes, including the
repayment of commercial paper.
4HEûCOMPANYûLAUNCHEDûAû53BNûlVE
YEARûATûBPûOVERû4REASURIES ûAû53Mû
SEVEN
YEARûATûBP ûAû53BNû
YEARûATû
BP ûAû53Mû
YEARûATûBP ûAû
US$1.5bn 30-year at 200bp and a US$750m
40-year at 230bp.
0EPSI#OSûûûTHATûPRICEDûINû*ULYû
ûWASûQUOTEDûAROUNDûBPûOVERû
Treasuries on Monday, according to
MarketAxess data.
4HEûPOTENTIALûFORûELEVATEDûCONCESSIONSû
MADEûTHEûISSUANCEûALLûTHEûMOREûATTRACTIVEûFORû
INVESTORS ûGIVENûTHATû0EPSI#OûOPERATESûINûANû
in-demand sector, according to CreditSights.
“Consumer staples are still well
POSITIONEDûRELATIVEûTOûOTHERSûTHATûAREûMOREû
EXPOSEDûTOû#OVID
ûDISRUPTIONS ûGIVENûTHEû
tailwind from recent pantry stocking and
THEûGENERALûSAFE
HAVENûCHARACTERISTICSûOFûTHEû
business,” wrote James Dunn, senior analyst
at CreditSights.
“That said, we think we could still see
LARGEûCONCESSIONSûBECAUSEûOFûTHEûOVERALLû
market conditions.”
0EPSI#OûISûALSOûPARTICULARLYûATTRACTIVEûFORû
ITSûSTRONGûENVIRONMENTALûSOCIALûANDû
GOVERNANCEûSCORESû)NûFACT ûTHEûLASTûTIMEûTHEû
company accessed the market was to issue a
US$1bn 30-year green bond.30 International Financing Review March 21 20206 IFR Bonds 2325 p 23 - 45 .indd 30 20 / 03 / 2020 19 : 59 : 40