Jun 25, 2020
Occidental Plans First Junk Bond Sale to Fund Debt Buybacks
(Bloomberg) -- Occidental Petroleum Corp. is selling new high-yield debt to fund its planned buyback of up to $1.5 billion of bonds maturing in the coming years as it seeks to tackle its wall of upcoming debt maturities.
The Houston-based company is issuing five-, seven- and 10-year unsecured notes to fund its repurchase offer and refinance existing debt, according to a person familiar with the matter, who asked not to be named because the offering is private. It’s the company’s first trip to the bond market since it lost its investment-grade credit ratings in March.
Citigroup Inc. is leading the offering, which may be sold as soon as Friday, the person said.
Occidental’s top repurchase priority is $1.25 billion of 4.10% floating-rate notes due in 2021, the company said in a statement Thursday. It’s offering holders $1,005 per $1,000 of bond principal turned in by the buyback’s July 9 early deadline.
The company is also accepting another eight series of bonds that mature in 2021 and 2022. Holders of those notes could receive between $935 and $1,007.50 per $1,000 of principal if they meet the early deadline.
The buyback’s final deadline, with less favorable terms for investors, is July 23 at 11:59 p.m. in New York.
Occidental has been under extreme pressure ever since outbidding Chevron Corp. to win the purchase of Anadarko Petroleum Corp. last year. The deal saddled Occidental with some $40 billion of debt that was looking hard to pay off even before Covid-19 wiped out global oil demand, sending crude prices plunging.
The crisis caused by the pandemic also effectively froze the market for asset sales, a key plank in Chief Executive Officer Vicki Hollub’s plan to reduce debt.
The company has gone from being a steady, diversified oil producer to a debt-laden, shale-focused driller that now has a market value of just $16.2 billion, less than half of the price it paid for Anadarko. It became part of a wave of so-called “fallen angels” after its credit ratings were cut to junk in March.
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