Exxon`s debt deal comes less than two weeks after Moody`s Investors Service downgraded the oil giant`s top credit ratings from Aaa to Aa1, with a negative outlook due to the collapse in oil prices, its “significant negative cash flow, financed by debt in 2020” and the uncertainty caused by the pandemic. “While this segment grew in 2012-19, the COVID-19 shock will result for several years in more conservative and liquid balance sheets,” Michael Kelly, a global multi-asset team at PineBridge Investments, wrote Monday in a client note that called the loans a “new Spot Sweet” investment degree. Exxon announced $46.9 billion in debt by the end of 2019. In March, the company also issued $8.5 billion in corporate bonds and had a $14.9 billion credit facility from Moody`s. Since then, U.S. investment-level corporate bonds have staged a strong rally, and not a small portion because of the Federal Reserve`s $2.3 trillion lifeline to maintain the flow of credit into financial markets. “We start this period with increased spreads, then conservatism and the Central Bank of the United States, which joins the European Central Bank (ECB) to extend balance sheet growth to GI loans.” On Monday, the U.S. benchmark West Texas lost intermediate crude oil for delivery in May U.S.: CLK20 35 cents or 1.5%, to end at 22.41 $US a barrel on the New York Mercantile Exchange, after Saudi Arabia, Russia and other major oil-producing countries agreed on 4% in early May 1 to reduce production by 9.7 million barrels per day. The oil and gas giant sold a set of five-part bonds, the shortest in April 2023 with a yield of 1.571%, while its 30-year bond yielded 3.452%, according to a person with direct knowledge of the deal.
The Fed last week stepped up its support for corporate borrowers, including adding speculative (or poorly rated) corporate bonds to a series of emergency loan facilities that will help pave the way for pandemic borrowers. In 2016, S-P Global Ratings lowered Exxon`s top AAA ratings and again lowered its ratings from an AA-encoding rating in March, with the oil giant`s cash flow well below expectations. The hope is that companies will be more sober in borrowing than in the last ten years, while receiving money for several dark quarters of profits. U.S. stocks ended Monday`s session in a mixed light, with the Dow Jones Industrial Average DJIA down 0.31% by more than 300 points, although there are signs that parts of the economy may reopen sooner than expected. Last week, Exxon announced that it would cut capital spending by 30 percent this year to about $23 billion, largely by retreating to the Perm Basin, and reducing its cash operating costs by 15 percent to offset the fall in commodity prices caused by the pandemic. See: Bank of America, Exxon, Verizon under a corporate boom, the public corporate bond spigot for financing Exxon Mobil Corp., unimpressed by the drop in oil prices, took an additional $9.5 billion in the U.S. corporate bond market on Monday, which was the rush of companies that have a cash war in the middle of the Corona pandemic.