Exxon pays more to borrow amid market turmoil

TEXAS: Exxon Mobil Corp paid a big premium to raise $8.5 billion in new debt on Tuesday, as a rout in energy prices and stock market jitters fuelled by the coronavirus outbreak eroded investor confidence in the largest US oil producer.
Exxon was among nine major companies that took advantage of a window opening in the US credit markets on Tuesday to issue bonds, after the Federal Reserve announced new measures to boost liquidity in the financial system, including the purchase of short-term corporate debt.
Exxon, which is rated Aaa/AA by credit rating agencies, issued its debt at a 60 basis point premium to PepsiCo Inc, which has a lower investment-grade rating of A1/A+.
“Exxon had to pay a huge premium to where the bonds should have been, because they are in an industry that is viewed very negatively right now,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.
Saudi Arabia is locked in an oil price war with Russia following the collapse earlier this month of an output deal between OPEC and its allies that has wiped 30 per cent off energy prices.
Compounding Exxon’s woes is the coronavirus pandemic, which has infected more than 196,000 people around the world and killed more than 7,800, and caused severe business and travel disruptions across the globe, fuelling fears of an economic downturn.
On Monday, Exxon said it would make “significant” cuts to spending in the face of the unprecedented slide. The company just two weeks ago had pledged to “lean in” to the market drop and maintain outlays in a belief oil demand would rise in the long run. — Reuters