Oxy nets $3 billion worth of orders in high-yield bond sale

NEW YORK (Bloomberg) --Occidental Petroleum has garnered around $3 billion of orders for its inaugural high-yield bond sale, according to people with knowledge of the matter.

Pricing discussions on the company’s planned three-part unsecured offering include a five-year bond with a yield of 7.75% to 8%. A seven-year note may yield between 8.25% and 8.5%, while a 10-year security may yield 8.75% to 8.875%, according to other people, who asked not to be named because the discussions are private.

Citigroup Inc. is leading the deal, and the debt may be sold as soon as Friday. Representatives for Citigroup and Occidental declined to comment.

Occidental is using proceeds from the sale to buy back as much as $1.5 billion of bonds maturing in 2021 and 2022. The company is seeking to tame its balance sheet after it purchased Anadarko Petroleum Corp. last year in a transaction that saddled the company with around $40 billion of debt.

Since then, oil prices have plunged as Covid-19 diminished global demand for the commodity. The pandemic added new strain to Occidental’s balance sheet, and the company lost its investment-grade credit ratings in March.

Much of the company’s existing debt trades substantially below par, mirroring a broad slump in high-yield energy credit. The company’s $1.5 billion 3.5% bond due 2029 sunk 4.5 cents on the dollar Friday to trade at 74 cents, according to Trace.

The new bonds mark the company’s first debt sale since it was cut to junk. Moody’s Investors Service downgraded the company another step on Thursday to Ba2, the second-highest speculative-grade rating, saying the acquisition debt continues to strain Occidental and its “prospects for near-term improvement remain uncertain.” Fitch Ratings upgraded the company one notch to an equivalent BB rating, and said the transaction should help Occidental confront its wall of upcoming maturities.