Sprint Nextel bonds gain despite downgrade; Hertz paper continues to climb on acquisition news

By Stephanie N. Rotondo

Portland, Ore., April 3 - Sprint Nextel Corp.'s debt moved higher Friday, despite an outlook downgrade from Standard & Poor's.

S&P said the change came as it expected Sprint to continue to face subscriber losses and competition from other wireless providers. Some sources speculated that the bonds' movement was due to short covering.

Meanwhile, Hertz Global Holdings Inc.'s notes continued to gain momentum. The bonds began trading up earlier in the week when it was announced that the company had purchased a rival rental car company for a bargain.

Overall, traders called the distressed marketplace firm, though sources at different desks gave opposing views on the day's activity. One deemed the day "pretty active" while another called it "quite dead."

"I think there is definitely still a bit of caution in the market, no doubt," another source said.

Sprint gains despite downgrade

Sprint Nextel's debt gained some during the final trading session of the week. The move came despite an outlook downgrade from S&P, and one trader speculated the gains could be due to short covering.

The trader called the 8¾% notes due 2032 nearly a point better at 70.75, with about $23 million trading. The 6% notes due 2016 moved up more than a point to 75.75, while the 6 7/8% notes due 2028 inched up a tad to 63.5.

Another trader said the longer issues were the most active, the 8¾% notes at 70.5 bid, 71 offered, up just a touch from 70 bid, 71 offered on Thursday.

S&P lowered its outlook on the cellular services provider to negative, citing continued subscriber declines and increased competition.

"Despite its efforts to improve customer service and reduce churn levels, Sprint Nextel will be challenged to reverse these trends over the next year given our expectation for increased competition and weaker economic conditions," said S&P credit analyst Allyn Arden in a statement.

S&P affirmed its current ratings on the Overland Park, Kan.-based company. However, the negative outlook could result in a downgrade in the future.

Hertz continues to climb

Rental car company Hertz saw its bonds continue to drive forward after news earlier in the week about the company's acquisition of Advantage Rent-A-Car.

A trader called the 8 7/8% notes due 2014 1.5 points better at 63 bid, though the 10½% notes due 2016 were unchanged at 48.

At another desk, a trader said the 8 7/8% notes "looked a little better on the bid side," quoting the issue at 61.5 bid, 62 offered, compared with 60 bid, 62 offered previously.

On Wednesday, Hertz won a bankruptcy auction of Advantage Rent-A-Car's assets, including 25 leases and airport concession agreements, for $30.3 million. The company also received Advantage's web site, as well as some of its trademarks in the auction held Tuesday,

Hertz beat out Enterprise Rent-A-Car's $19 million bid.

Advantage posted revenues of about $146 million in 2008, according to a press release posted on Hertz's web site.

"We're pleased to have secured the purchase of Advantage Rent-A-Car, a popular brand for price-oriented customers at key U.S. leisure travel destinations," said Mark P. Frissora, Hertz's chairman and chief executive officer, in a press release. "Underscoring our commitment to serve all segments of the leisure car rental market, the 20 Advantage locations, combined with our six Simply Wheelz locations and the Hertz brand nationwide, enable us to serve the wide range of service and price-oriented car rental customers in the United States."

Hertz is based in Park Ridge, N.J.

Broad market mixed

Among other topical names in the distressed arena, Charter Communications Inc.'s 10¼% notes due 2010 were deemed weaker around 91, while its 8% notes due 2012 slipped to 92.5 bid, 93.5 offered.

Rite Aid Corp., which posted a wider quarterly loss on Thursday, saw its bonds remaining on an upward track.

"The senior secureds are continuing to get better," a trader said. He quoted the 7½% notes due 2017 at 60 bid, 61 offered, a gain of a point.

After spending much of the week trading actively, General Motors Corp.'s bonds quieted down some. The benchmark 8 3/8% notes due 2033 were deemed unchanged at 11.5 bid, 12 offered.

A trader said that Ply Gem Industries Inc.'s 11¾% notes due 2013 were still around the 44 level on "not much activity," while its 9% notes due 2012 were closing around 28 bid, "obviously up" from the lower-to-mid-20s level to which the bonds fell earlier in the week, but again on "not much activity."

A trader saw MGM Mirage's 13% secured notes due 2013 in a "79ish" context for most of Thursday, but said the bonds had advanced to 81 at the end of Friday's dealings, up a t least a point on the session. Those bonds, he noted, had been in the mid-70s at the beginning of the week, but got a boost on the reported Colony Capital talks about its CityCenter project.

However, at another desk, MGM's 6 5/8% notes due 2015 were seen down nearly a point on the day at 37.5.

Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.