American Airlines notes head lower on travel worries; Hertz drops as CFO resigns

By James McCandless

San Antonio, Sept. 29 – The distressed debt space continued to focus on travel names as the industry continues to see strife.

American Airlines Group, Inc.’s notes lost ground after a travel trade association said it expected fewer people to fly through the rest of the year than expected.

Sector peer United Airlines Holdings, Inc.’s issues diverged.

In the vehicle rental space, Hertz Global Holdings, Inc.’s paper was pushed lower following the resignation of the company’s chief executive officer.

Meanwhile, in retail, Revlon, Inc.’s notes varied in direction after the company started an offer to exchange its 2021 notes.

Department store name Nordstrom, Inc.’s issues also saw mixed results.

Oil and gas producer Transocean Ltd.’s paper was under pressure despite receiving a ratings upgrade.

Amid a losing day for oil futures, Occidental Petroleum Corp.’s, Antero Resources Corp.’s and SM Energy Co.’s notes were pulled in different directions.

Airlines eyed

American Airlines’ notes lost some ground during the Tuesday session, traders said.

The 5% senior notes due 2022 shed 1 point to close at 68 bid. The 11¾% senior notes due 2025 declined by ¼ point to close at 96¾ bid.

The airline industry, including the Fort Worth-based carrier, saw negative market sentiment after a travel trade association painted a worse-than-expected picture for the rest of the year in travel.

The International Air Transport Association announced that it now expects global traffic to be down 66% for the year, wider than its original estimate of a 63% reduction.

In a statement, the group’s director stated that “August’s disastrous traffic performance puts a cap on the industry’s worst-ever summer season.”

American Airlines has taken steps to shore up liquidity in recent weeks, including securing loans from the federal government and Goldman Sachs.

As the airline waits for potential legislation authorizing a second round of payroll aid, it closed on a $5.5 billion loan from the Treasury department.

American has warned that thousands of workers would be at risk of furlough if the aid package is not passed by Oct. 1.

Chicago-based sector peer United Airlines’ issues diverged.

The 5% senior notes due 2024 lost 1 point to close at 88 bid. The 4¼% senior notes due 2022 tacked on ¼ point to close at 92¼ bid.

Hertz edges lower

In the vehicle rental space, Hertz’s paper was pushed lower, market sources said.

The 6¼% senior paper due 2022 shaved off ¼ point to close at 45¾ bid. The 5½% senior notes due 2024 dipped ½ point to close at 46 bid.

At the close on Monday, the Estero, Fla.-based car rental company announced that CFO Eric Esper would step down to pursue a new opportunity.

Esper had been in the position for two months and was previously Hertz’s chief accounting officer.

Executive vice president of finance Kenny Cheung has been elevated to the CFO position, with Esper remaining in the accounting role until Nov. 1.

Recently, Hertz has been seeking more than $1 billion in debtor-in-possession financing as it works through the bankruptcy process.

“Everything wasn’t exactly strong today, but Hertz was particularly shaky,” a trader said.

Revlon, Nordstrom vary

Meanwhile, in retail, Revlon’s notes varied in direction, traders said.

The 5¾% senior notes due 2021 garnered 3½ points to close at 35 bid. The 6¼% senior notes due 2024 slipped 1 point to close at 13¼ bid.

Early Tuesday, the New York-based cosmetics producer commenced an offer by direct wholly owned operating subsidiary Revlon Consumer Products Corp. to exchange any and all outstanding $344,785,000 of its 5¾% notes for cash or a combination of cash and ABL FILO term loans and new BrandCo second-lien term loans, Prospect News reported.

Concurrently with the offer, Revlon is solicitating consents to eliminate substantially all of the restrictive covenants and certain events of default provisions from the indenture governing the notes.

The exchange offer is set to expire at 11:59 p.m. ET on Oct. 27.

Seattle-based department store chain Nordstrom’s issues also saw mixed results.

The 5% senior notes due 2044 held level to close at 71¼ bid. The 6.95% senior debentures due 2028 moved up ½ point to close at 100 bid.

Transocean down

Oil and gas name Transocean’s paper was under pressure, market sources said.

The 7½% senior notes due 2031 fell 1½ points to close at 14¼ bid. The 6½% senior notes due 2020 moved down 1¾ points to close at 91¾ bid.

The Steinhausen, Switzerland-based contract driller’s structure saw pressure despite receiving a ratings upgrade on Tuesday morning.

S&P Global Ratings raised the company’s issuer credit rating to CCC- from SD and affirmed a negative outlook.

The agency said that the updated rating “reflects the high likelihood of additional distressed transactions.”

The company has $8.6 billion in debt outstanding.

Energy sector activity

Amid a losing day for oil futures, distressed energy tranches were pulled in different directions, traders said.

West Texas Intermediate crude oil futures for November delivery dropped $1.31 to end the day at $39.29 per barrel.

North Sea Brent crude oil futures for December delivery finished at $41.56 per barrel after lopping off $1.31.

Houston-based independent oil and gas producer Occidental Petroleum’s notes drifted apart.

The 2.9% senior notes due 2024 weakened by ¾ point to close at 83½ bid. The 2.7% senior notes due 2022 picked up ¼ point to close at 93 bid.

Denver-based producer Antero Resources’ issues also moved on differing tracks.

The 5 5/8% senior notes due 2023 closed level at 73¾ bid. The 5% senior notes due 2025 fell 1½ points to close at 62¼ bid.

SM Energy, another Denver-based E&P, saw its paper take different paths.

The 6¾% senior notes due 2026 fell 2 points to close at 43 bid. The 6 5/8% senior notes due 2027 gained ½ point to close at 45 bid.

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