Hertz notes in focus as lender deal struck; Extraction Oil paper gains in energy space

By James McCandless

San Antonio, July 21 – Distressed debt trading focused on the travel and energy sectors on Tuesday.

Hertz Global Holdings, Inc.’s notes varied in direction after the company struck a deal with lenders to settle a dispute over the company’s fleet of cars.

In the energy space, Extraction Oil & Gas, Inc.’s issues picked up steam as it won access to its debtor-in-possession financing.

As oil futures jumped, Occidental Petroleum Corp.’s and Whiting Petroleum Corp.’s paper followed while Denbury Resources Inc.’s notes dipped.

Meanwhile, air carrier United Airlines Holdings, Inc.’s issues were lifted in the run-up to the company’s second-quarter earnings release.

Sector peer American Airlines Group Inc.’s paper was also positive.

Elsewhere, REIT CBL & Associates Properties, Inc.’s notes were improving while Washington Prime Group Inc.’s issues declined.

Hertz flat to higher

Hertz’s notes varied in direction by the end of the Tuesday session, traders said.

The 6¼% senior notes due 2022 added ½ point to close at 38½ bid. The 5½% senior notes due 2024 held level at 39½ bid.

On Tuesday, the Estero, Fla.-based car rental company said it has agreed to pay $650 million owed under a master lease agreement as part of a temporary resolution of disputes related to its lease rejection motion, Prospect News reported.

The deal settles a dispute with its creditors over how to handle the leases of about 500,000 car leases.

Originally, the company wanted to convert the master lease into individual leases but will cease that push as part of the new agreement.

Under the new agreement, Hertz must pay regular rent on each car and a fee to cover depreciation.

“The fleet is very underutilized right now so this move makes sense,” a trader said.

The hearing on the lease rejection motion will be adjourned until after Jan. 15, 2021.

Extraction better

In the energy space, Extraction Oil & Gas’ issues picked up steam, market sources said.

The 7 3/8% senior notes due 2024 picked up 2¼ points to close at 22¼ bid.

During the Tuesday session, the Denver-based independent oil and gas producer obtained final court approval to access $125 million in DIP financing, Prospect News reported.

The financing is made up of $50 million in new money and $75 million of revolving loans under an existing revolving credit agreement.

The company expects the new financing to provide sufficient liquidity to its Chapter 11 case.

Extraction filed for bankruptcy on June 14 after racking up about $1.7 billion in debt.

Oil trends upward

As oil futures saw a jump, distressed energy names trended likewise, traders said.

West Texas Intermediate crude oil futures for August delivery shot up $1.15 to settle at $41.96 per barrel.

North Sea Brent crude oil futures for September delivery finished the day at $44.32 per barrel after a $1.04 boost.

Houston-based E&P Occidental Petroleum’s paper followed the trend of oil futures.

The 2.9% senior notes due 2024 rose 1½ points to close at 92½ bid. The 2.7% senior paper due 2022 gained ¾ point to close at 95¾ bid.

Denver-based producer Whiting Petroleum’s notes were also moving up.

The 6¼% senior notes due 2023 grabbed ¾ point to close at 19¾ bid. The 6 5/8% senior notes due 2026 tacked on ¼ point to close at 20 bid.

Houston-based peer Denbury Resources’ issues dipped.

The 4 5/8% senior subordinated notes due 2023 shed ½ point to close at 2½ bid.

Airlines lifted

Meanwhile, air carrier United Airlines’ paper was lifted by day’s end, market sources said.

The 5% senior notes due 2024 improved by 1½ points to close at 82½ bid. The 4¼% senior paper due 2022 shifted up 2¼ points to close at 87½ bid.

The Chicago-based airline’s structure was active in the run-up to the company’s second-quarter earnings report at the end of activity on Tuesday.

The company reported an earnings per share loss of $9.31, wider than the analyst consensus of an expected loss of $9.02 per share.

Revenues came in at $1.48 billion, edging out analyst predictions of $1.32 billion and well below the $11.4 billion from the same period last year.

The company has previously warned of potential furloughs for about 36,000 of its U.S. frontline workers, citing a plummet in demand amid the coronavirus pandemic.

Fort Worth-based sector peer American Airlines’ notes were also positive.

The 5% senior notes due 2024 rose ¼ point to close at 57¾ bid. The 3¾% senior notes due 2025 jumped up 4 points to close at 49¼ bid.

CBL gains

Elsewhere, mall owner CBL’s issues were improving, traders said.

The 5¼% senior notes due 2023 tacked on 1¾ points to close at 27¼ bid. The 4.6% senior notes due 2024 inched up ¼ point to close at 26 bid.

The Chattanooga, Tenn.-based real estate investment trust’s issues have seen heightened attention after late Friday reports indicated that the company is prepping for a Chapter 11 bankruptcy filing.

Talks with the name’s creditors are ongoing with the goal of reaching a pre-packaged restructuring agreement.

CBL’s revenue has been hampered by business closures across the country due to the coronavirus.

Columbus, Ohio-based real estate name Washington Prime’s paper declined.

The 6.45% senior notes due 2024 fell 1 point to close at 42 bid.

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