Hertz hurt by fourth-quarter results; Station mixed, Boyd continues retreat; Energy Future, TXU drop

By Stephanie N. Rotondo

Portland, Ore., Feb. 24 - A trader called the distressed bond market "very, very active" Tuesday, while another said the "market was hanging in there."

But Hertz Global Holdings Corp.'s debt was surely not hanging in there, following a poor fourth-quarter report. The company's bonds dropped as much as 5 points on the day on the back of the numbers. The company also failed to give guidance, due to uncertain market conditions.

Meanwhile, Station Casinos Inc.'s bonds were largely mixed, while Boyd Gaming Corp.'s notes continued to retreat. The movements came one day after Boyd offered Station $950 million for some of its assets, which had resulted in Station's bonds gaining as much as 10 points on Monday.

Energy Future Holdings Corp., also known as TXU Corp., saw its bonds fall at least 3 points during the session. The declines came as the power producer said it was planning to write down more than $9 billion in assets.

Hertz hurt by fourth quarter

Hertz bonds "got crunched," a trader said, following the company's release of its fourth-quarter results.

The trader quoted the 8 7/8% notes due 2014 at 53 bid, 54 offered, down from "the mid-60s not long ago."

Another trader deemed the issue 5 points weaker at 54, with more than $26 million trading.

Yet another source pegged the paper at 54.25 bid, a loss of 4.75 points on the day.

The term loan was quoted at 66½ bid, 67½ offered, down from previous levels of 69 bid, 70 offered, another trader said.

For the fourth quarter, the company reported a net loss of $1.21 billion, or $3.76 per share, compared with net income of $80.7 million, or $0.25 per share in the 2007 fourth quarter.

Adjusted pre-tax loss was $103.7 million, versus adjusted pre-tax income of $152.5 million in 2007, and adjusted net loss was $73 million, compared with adjusted net income of $93.9 million last year.

Revenues for the quarter were $1.79 billion, a decrease of 16.4%, from $2.14 billion in 2007.

And, corporate EBITDA for the quarter was $116.9 million, a decrease of 69.7% from the same period in 2007.

As for an outlook, due to continued volatility in car and equipment rental markets, with volume, pricing and residual value declines attributable to the global recession, the company said it was unable to provide specific quarterly or full year 2009 revenue, earnings and cash flow guidance.

Hertz also said on Monday night that it ended the fourth quarter with total debt of $10.97 billion and net corporate debt of $3.82 billion, compared with total debt of $12.84 billion and net corporate debt of $4.25 billion as of Sept. 30, 2008.

Levered cash flow for the quarter was $430.5 million, compared with $586.8 million in the fourth quarter of 2007.

"Hertz experienced unprecedented volume, pricing and residual value contraction across all of its businesses in the fourth quarter of 2008. Nevertheless, we generated almost $117 million of corporate EBITDA," Mark P. Frissora, chairman and chief executive officer, said in a news release.

"Additionally, for the fourth quarter, we generated improved total net cash flow of $1.8 billion, reducing total debt by $1.9 billion, and improved liquidity at year-end to approximately $4.8 billion. We are committed to further mitigating the impact of continued revenue declines on our profits, including a goal to eliminate an additional $350 million of costs in 2009, and generating positive total net cash flow throughout the current global recession," Frissora added.

As a result of the company's poor quarter, Fitch Ratings cut Hertz's outlook to negative.

Hertz is a Park Ridge, N.J.-based car rental brand.

Station mixed, Boyd retreats

Depending on whom you asked, Station Casinos' debt was either up or down following news in the previous session that Boyd Gaming had made an offer for some of the company's properties.

A trader saw the 6% notes due 2012 slip 3.5 points to 31.5, while the 7¾% notes due 2016 gained 7.5 points to close at 33.

Another trader pegged the 6% notes at 31 bid, 32 offered, versus levels around 35 on Monday. He also saw the 7¾% notes at 31 bid, 33 offered.

At another desk, a source called the 6% notes 6.25 points better at 32.25 bid.

Boyd, on the other hand, continued to fall during Tuesday trading.

A trader saw the 7¾% notes due 2012 drop a deuce to 75 and another called the issue more than 5 points lower at 72 bid.

Late Monday, Boyd told Station it was interested in purchasing some of the company's assets, possibly as part of a bankruptcy reorganization. Boyd gave a price of $950 million for the properties.

But market players have differing reactions to the proposed deal.

In a Forbes report, Susquehanna Financial Group's Robert LaFleur said the deal might make sense, considering that the properties in question are sites that Las Vegas locals frequent.

"The locals market has clearly been knocked for a loop over the past few years as new supply compounded the negative effects of the Las Vegas housing market collapse and rising local unemployment. That said, the locals market is probably closer to the end of its problems than the beginning," the analyst wrote in a note to clients.

Gimme Credit analyst Kim Noland also saw the buyout as a positive for Boyd.

"We think this is a shrewd move by Boyd, since it is the other major gaming company in the Las Vegas locals market," she wrote in an afternoon comment. "Boyd understands the current risks and is probably paying a lower multiple than estimated given likely synergies."

Noland went on to say that Station's current pre-packaged bankruptcy offer "is destined to fail."

And, as another market source put it: There is "a lot of wood to chop" before the deal gets done.

TXU notes drop

Energy Future Holdings, better known as TXU, said late Monday it would write down about $9.6 billion in assets for the quarter. As a result, traders saw the company's bonds drop at least 3 points.

One trader placed the 10¼% notes due 2015 at 56.5, down 3.5 points with 428 million changing hands. He also saw the 10 7/8% notes due 2017 dip 3 points to 62.5, with $22 million trading.

Another trader quoted the 10¼% notes at 55 bid, 58 offered, compared with 62 bid, 64 offered the day before. The 10 7/8% notes closed at 61 bid, 62 offered, down from 68 bid, 70 offered.

Energy Future acquired TXU for 445 billion in 2007. As the market value of those assets has declined amid the financial turmoil, Energy is planning to write down the value of those assets. Part of the impairment is an $8.9 billion goodwill charge.

The charges "resulted from an assessment of the carrying value of these assets triggered by the recent declines in market values of debt and equity securities of comparable companies," Energy said in a press release.

Energy Future is a Dallas-based energy holding company, with a portfolio of competitive and regulated energy subsidiaries, primarily in Texas, including TXU Energy, Luminant and Oncor.

Broad market mixed

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 inched up slightly to close at 86.

Chemtura Corp.'s 6 7/8% notes due 2016 traded actively, a trader said, ending at 52. The trader said that was a good 15 points better than where it was 10 days previous. The gains were likely due to news earlier in the week that the several parties were interested in buying the company's assets.

Nielsen Media Research Inc.'s 12½% notes due 2016 closed unchanged at 40.

AK Steel Corp.'s 7¾% notes due 2012 dipped 2 points to close at 86 bid, 87 offered.

Paul Deckelman and Sara Rosenberg contributed to this article.

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