It’s been a crazy week for public oil & gas producer California Resources (ticker:CRC), as explained by the Wall Street Journal: “Exploration and production company California Resources has also taken bondholders on a roller-coaster ride in recent days. The firm’s 8% bond due 2022 jumped about 15% to 64 cents on the dollar Monday after attacks on Saudi Arabian production facilities lifted global oil prices before falling about 25% to 48 cents on the dollar Thursday, following a media report that the company was also hiring a restructuring adviser. The debt rebounded to 58 cents on the dollar Friday after the company denied the report.“.
We doubt that will be the end of the story with so much of the oil patch – even larger companies like California Resources – in financial trouble, but in this case the trend – which we mark every story with our assessment of – is up.
However, we couldn’t help noticing that the debt tranche held by the only BDC with exposure – non listed Business Development Corporation of America (BDCA) is currently trading at a (9%) discount to par after all these oscillations, compared to a (3%) discount on BDCA’s books as of June 2019. The exposure has a total cost of $12mn and yields 7.15%.