California Resources Corporation Buys Some Additional Time With Another Forbearance, But Bankruptcy Looms

Another deadline and another forbearance extension for California Resources Corporation (CRC). For at least the third time over the past month the California based oil producer (and OXY spinoff) was able to buy some additional time from its lenders on its missed interest payments. The new deadline is now July 12th…a mere four days later. The forbearance periods are getting shorter and shorter though so perhaps the company is closer to a restructuring or a bankruptcy filing.

S&P recently downgraded the company’s debt to D from CC:

The downgrade came after California Resources skipped interest payments on its 1.5-lien term loan due 2021, first-lien term loan due 2022, and 8% second-lien notes due 2022. Ratings noted that the downgrade reflects the probability that California Resources will fail to make the aggregate interest payments within the 30-day grace period as the company “pursues a comprehensive capital restructuring or bankruptcy filing.”

Somehow the stock was up 17% to $1.28 on Wednesday implying a ~63M market cap. Perhaps it’s part of a hedging strategy or structured trade? Robinhood day traders? Whatever the reason, it’s a dangerous stock to be playing around in and the ending is likely to be sadness.

Disclosure: Author holds no position in any stock mentioned.