Hertz notes eyed amid report adviser hired; L Brands active as sale of unit cancelled

By James McCandless

San Antonio, May 4 – Shifting ground in the retail space marked the start of the week in the distressed debt market.

Hertz Global Holdings, Inc.’s notes varied in direction amid reports that it has hired an additional restructuring adviser.

Meanwhile, in retail, L Brands, Inc.’s issues diverged before late news that its Victoria’s Secret asset sale has been cancelled.

Sector peer Revlon, Inc.’s paper improved on news that the company closed in on a deal to refinance $1.8 billion in debt.

Manufacturer United States Steel Corp.’s notes were positive on the heels of a disappointing earnings report and layoff news.

In oil and gas, Chesapeake Energy Corp.’s issues mirrored positive oil futures, Occidental Petroleum Corp.’s paper saw mixed activity while SM Energy Co.’s notes dipped.

Utilities name PG&E Corp.’s issues were carried higher as the company receives an analyst upgrade.

Elsewhere, mining company Cleveland-Cliffs Inc.’s paper weakened.

Hertz varies

Hertz’s notes varied in direction during the Monday session, traders said.

The 6¼% senior notes due 2024 crashed 12 points to close at 9½ bid. The 5½% senior notes due 2024 added ½ point to close at 15 bid.

Near the end of Monday trading, news broke that the Estero, Fla.-based car rental company has hired an additional restructuring adviser as it mulls the prospect of bankruptcy.

The company has tapped FTI Consulting to advise on streamlining operations as it prepares to tackle its $17 billion debt load.

Last month, the company had hired Moelis & Co. as restructuring adviser.

More recently, Hertz signaled that it would forego an interest payment related to its vehicle leases.

Talks with creditors and banks are ongoing.

L Brands diverges

Meanwhile, in the retail space, L Brands’ issues diverged, market sources said.

The 6¾% senior notes due 2036 were docked 1 point to close at 73 bid. The 5¼% senior notes due 2028 held level at 73¼ bid.

The Columbus, Ohio-based retailer’s structure was active throughout the day, leading up to late news that the company and private equity firm Sycamore Partners agreed to terminate a $525 million asset sale.

The deal for Sycamore to purchase a 55% stake in the name’s Victoria’s Secret unit was originally struck in in February.

Sycamore announced last month that it wanted to terminate the deal because it saw the company’s value significantly reduced due to loss of income amid the coronavirus pandemic.

Both parties filed complaints in court last week before reaching the termination agreement.

L Brands has said it will implement cost reduction and performance improving measures for Victoria’s Secret.

“They will not be happy with any bid they get in the short term,” a trader said. “They will hate it, creditors will hate it and shareholders will hate it.”

Revlon up

Sector peer Revlon’s paper ended the day improving, traders said.

The 5¾% senior paper due 2021 gained 1½ points to close at 50 bid. The 6¼% senior notes due 2024 picked up 2¼ points to close at 18½ bid.

In the middle of Monday’s session, news broke that the New York-based cosmetics producer had achieved enough creditor support for its efforts to overhaul $1.8 billion in debt.

The company had announced on Friday that it had amended and restated its debt commitment to provide for $880 million of term loans.

Amid its efforts, a group of lenders had reportedly opposed the move, arguing that the company had defaulted on its debt last August.

U.S. Steel better

Manufacturer U.S. Steel’s notes were positive, market sources said.

The 6 7/8% senior notes due 2025 garnered 1 point to close at 67 bid. The 6¼% senior notes due 2026 shifted up 1 point to close at 62 bid.

The Pittsburgh-based steelmaker’s structure saw modest gains after days of negativity following a disappointing earnings report for the first quarter.

The company showed a loss of 73 cents per share, narrower than analyst predictions of an 80 cents per share loss.

Revenues came in at $2.75 billion, just under estimations.

Concurrently, the company also announced that it would lay off 2,700 employees due to market weakness in the pandemic.

Oil names mixed

In the oil and gas space, distressed energy names saw mixed results with positive futures in the backdrop, traders said.

West Texas Intermediate crude oil futures for June delivery were lifted by 61 cents to settle at $20.39 per barrel.

North Sea Brent crude oil futures for July delivery finished at $27.20 per barrel after a 76 cent pickup.

Oklahoma City-based independent oil and gas producer Chesapeake Energy’s issues mirrored the movements of futures.

The 11½% notes due 2025 rose ½ point to close at 3½ bid. The 5 3/8% senior notes due 2021 tacked on ½ point to close at 2 bid.

Houston-based producer Occidental Petroleum’s paper saw mixed activity.

The 2.9% senior notes due 2024 closed level at 76 bid. The 2.7% senior paper due 2022 chalked off ½ point to close at 87¼ bid.

Denver-based peer SM Energy’s notes declined.

The 6 1/8% senior notes due 2022 fell 9¾ points to close at 32¼ bid. The 5% senior notes due 2024 shed 1 point to close at 31 bid.

PG&E higher

Utilities name PG&E’s issues were carried higher, market sources said.

The 6.05% notes due 2034 improved by 5 points to close at 110¾ bid.

On Monday, the San Francisco-based bankrupt electric utility saw positivity after receiving an analyst upgrade from UBS.

In a note, the UBS analyst said that he upgraded the company’s stock to “buy” from “neutral,” arguing that the company will be well-positioned upon its exit from bankruptcy slated for June 30.

The utility released its first-quarter earnings report on Friday, announcing that it would replace 11 of 14 board members to comply with regulatory requirements.

Cleveland-Cliffs down

Elsewhere, mining name Cleveland-Cliffs’ paper weakened, traders said.

The 9 7/8% senior secured notes due 2025 shaved off ¼ point to close at 97¼ bid.

Last week, the Cleveland-based iron ore mining company received a ratings cut from S&P Global Ratings based on a recent $736 million unsecured note buyback.

The agency lowered its senior secured notes and senior unsecured notes ratings.

S&P viewed the transaction as “opportunistic” because no default was expected in the short-term.

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