Occidental Planning to Sell Bonds in Up to Five Parts

(Bloomberg) -- Oil giant Occidental Petroleum Corp. is planning to sell bonds in as many as five parts to help fund its planned acquisition of CrownRock LP, according to a filing on Friday. 

The energy company has asked banks to arrange calls with investors on Monday to discuss the offering, according to a person with knowledge of the matter. That makes it a candidate to sell debt as soon as Tuesday.

Proceeds from the sale will support Occidental’s purchase of CrownRock, another oil producer, and related refinancing transactions. The offering is not contingent on the completion of the acquisition, but if the deal fails to close by December 10, 2025, Occidental will buy back the outstanding notes at 101 cents on the dollar, according to the filing.

Occidental agreed in December to buy CrownRock for $10.8 billion, lining up about $10 billion of debt, including one of the largest bridge financing deals last year. That temporary loan was led by Bank of America Corp,, and is expected to at least party be replaced by the bond sale.

The sale will be led by Bank of America, JPMorgan Chase & Co., Mitsubishi UFJ Financial Group, and SMBC Nikko, according to the filing. Fitch assigned the proposed notes a grade of BBB-, citing concerns about the impact of incremental leverage from the CrownRock acquisition and potential elevated interest costs.

In June, Moody’s Ratings said they view the deal as “an aggressive financing for such a sizable acquisition.” However, the ratings company said Occidental plans to focus on repaying debt to a target balance sheet debt level of $15 billion or below, using asset sales, net proceeds and free cash flow to reverse a large portion of the debt increase.

On Thursday, Occidental said it expects to close its purchase of the Texas shale driller next month.

“We look forward to closing our transaction with CrownRock in August and welcoming their high-performing team into our organization,” Chief Executive Officer Vicki Hollub said in a statement. 

CrownRock has operations that complement assets Occidental acquired through its massive 2019 takeover of Anadarko Petroleum Corp., which led to the company being downgraded to junk. Soon after Occidental regained its investment-grade ratings from at least two bond graders, it announced plans to acquire CrownRock.

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