Revlon notes move lower; Transocean paper rallies; Hertz, Washington Prime improve

By Cristal Cody

Tupelo, Miss., May 10 – Distressed cosmetics manufacturer Revlon Consumer Products Corp.’s notes declined on Monday following the release of the company’s first-quarter earnings results.

Revlon’s 6¼% senior notes due 2024 (C/C/) fell more than 4½ points from Friday to the 34¾ bid area, a source said.

The notes started the year at 35 bid.

Revlon reported on Monday net sales fell by $8 million to $445 million in the first quarter from the year-ago period.

Operating losses declined to $12.7 million from $186.2 million in the same quarter last year, driven by lower impairment charges, lower selling, general and administrative expenses due to cost reductions associated with the company's restructuring program and lower restructuring charges.

“Despite continued Covid-19 headwinds, the company was able to improve its gross margin by 70 basis points,” Revlon said.

Revlon also reported in the same earnings release that it changed the collateral agent and administrative agent on a 2016 asset-based revolving credit agreement to MidCap Funding IV Trust from Citibank, NA.

Citigroup Inc. is appealing a February federal court verdict against the company’s efforts to recover funds it mistakenly sent to Revlon’s creditors in 2020.

Revlon said the amendment with MidCap, among other things, extends the scheduled maturity of the revolving credit facility and the second-in, second-out term loan from June 8, 2023 to May 7, 2024.

Market tone soft

The S&P U.S. High Yield Corporate Distressed Bond index closed Friday with a 1.55% month-to-date total return and a 23.41% year-to-date total return.

Market tone was soft on Monday.

The U.S. Department of Treasury announced it launched the Coronavirus State and Local Fiscal Recovery Funds, established by the American Rescue Plan Act of 2021, to provide $350 billion in emergency funding for state, local, territorial, and tribal governments. Funds can be used in efforts including to respond to acute pandemic-response needs, fill revenue shortfalls among state and local governments and support communities and populations hardest-hit by the pandemic.

The iShares iBoxx High Yield Corporate Bond ETF dropped 19 cents to close at $87.13.

Oil prices were modestly higher on the day.

West Texas intermediate crude oil benchmark futures for June deliveries rose 2 cents to $64.92 a barrel.

North Sea Brent crude oil futures for July delivery improved 4 cents to settle at $68.32 a barrel.

In distressed energy issues, Transocean Inc.’s 7½% senior notes due 2031 (C/CCC-/) climbed 2½ points to 59 bid on more than $12 million of secondary volume, a source said.

The offshore driller’s 7½% senior notes due 2026 (Ca/CCC) rose 1 point to 81 bid, up nearly 10 points month to date.

Hertz notes up

Hertz Corp.’s bonds were mostly stronger on Monday as the company jockeys to exit Chapter 11 bankruptcy and following the release of strong first-quarter earnings on Friday.

The company’s 6¼% senior notes due 2022 rose ½ point to 103 after improving 2½ points on Friday, a source said.

Hertz’s 7% senior notes due 2028 were up more than 3 points from the 96¼ bid area on Friday.

Hertz Global Holdings, Inc. reported Friday total first-quarter revenue of $1.29 billion, compared to $1.92 billion a year ago.

Net income improved to $190 million from a loss of $356 million a year ago.

Paul Stone, Hertz Global's president and chief executive officer, said in the release on Friday that the company is expected to emerge from bankruptcy in June.

“We are actively engaged with potential plan sponsor groups which we anticipate will deliver a robust recovery for creditors and shareholders,” Stone said. “We remain on track to emerge in June and are poised to do so with more efficient operations and a stronger balance sheet for the future.”

The company reported on Wednesday that it received a superior proposal to fund its Chapter 11 exit from affiliates of Knighthead Capital Management LLC, Certares Opportunities LLC and Apollo Capital Management, LP.

The Estero, Fla.-based car rental operator’s existing sponsors are affiliates of Centerbridge Capital Partners, LP., Warburg Pincus LLC and Dundon Capital Partners, LLC.

Hertz filed for Chapter 11 bankruptcy on May 22, 2020 in the U.S. Bankruptcy Court for the District of Delaware.

The latest proposal considers funding Hertz's plan of reorganization through direct common stock investments totaling $2.9 billion, direct preferred stock investments totaling $1.5 billion and a rights offering to raise $1.36 billion, as well as possible payment of all secured and unsecured funded debt.

Washington Prime gains

Washington Prime Group, LP’s bonds remained better on Monday following the release of weak first-quarter earnings, a source said.

The company’s 6.45% notes due 2024 (C/D/C) traded up more than 1 point to the 63 bid range.

The bonds remain off the 73½ bid area seen in mid-February.

Washington Prime Group Inc. reported in the first-quarter earnings release on Monday that its financial statements have been prepared assuming that it will continue as a going concern.

“The company’s management has stated that there exists substantial doubt about the company’s ability to continue as a going concern as defined by generally accepted accounting principles,” according to the news release.

Washington Prime reported net losses of $55.4 million, or $2.52 per share, compared to earnings of $3.4 million, or 16 cents per share, in the same period last year.

The company said it not providing 2021 guidance.

On Wednesday, the company reported in an 8-K filing with the Securities and Exchange Commission that it received approval to extend a forbearance agreement regarding a missed note payment to May 12.

Washington Prime Group disclosed in February that the operating partnership withheld a $23.2 million interest payment on the 6.45% notes that was due Feb. 15.

The Columbus, Ohio-based shopping center real estate investment trust said it is continuing to engage in negotiations and discussions with the forbearing noteholders and forbearing lenders to restructure its capital structure.

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