Hertz notes active on forbearance news; L Brands paper drops after asset sale nixed

By James McCandless

San Antonio, May 5 – The distressed debt space remained focused on the newsmakers in the retail sector and earnings releases on Tuesday.

Hertz Global Holdings, Inc.’s notes saw more varied movements on news that it had reached a forbearance agreement with lenders.

In the retail space, L Brands, Inc.’s issues dropped in reaction to the announcement that an asset sale had been terminated.

Sector peer Revlon, Inc.’s paper saw an improvement.

Meanwhile, Diebold Nixdorf, Inc.’s notes ended the day rising after releasing its first-quarter earnings report.

Pharmaceutical name Mallinckrodt plc’s issues weakened after showing disappointing results in its first quarter.

Generic drug maker Endo International plc’s paper tracked higher.

More gains for oil futures were followed by Occidental Petroleum Corp.’s notes while Whiting Petroleum Corp.’s and Chesapeake Energy Corp.’s issues diverged.

Hertz notes active

Hertz’s notes saw more varied movements by the close, traders said.

The 6¼% senior notes due 2022 jumped up 7½ points to close at 17 bid. The 5½% senior notes due 2024 shaved off ½ point to close at 14½ bid.

During the Tuesday session, news broke that the Estero, Fla.-based car rental company had reached a forbearance agreement with creditors.

The agreement extends a deadline for certain lease payments that it did not make last week to May 22.

According to the company, the extension gives it time to “develop a financing strategy and structure that better reflects the economic impact of the Covid-19 global pandemic.”

“The bankruptcy talk is a little premature,” a trader said. “They’ll file when they need to. But I don’t think they will file this month.”

Late Monday, reports indicated that the company had hired a second financial adviser to recommend ways to streamline operations.

L Brands down

In the retail space, L Brands’ issues dropped, market sources said.

The 6¾% senior notes due 2036 lost ¼ point to close at 73¾ bid. The 5¼% senior notes due 2028 trailed by 2¾ points to close at 70½ bid.

After the close on Tuesday, news broke that the Columbus, Ohio-based retailer and private equity firm Sycamore Partners had mutually agreed to terminate an asset sale agreement.

The company said that litigation costs were a factor.

In February, the two parties agreed that Sycamore would purchase a 55% stake in the Victoria’s Secret brand for $525 million.

But after the outbreak of Covid-19, retailers shuttered physical locations and Sycamore moved to nix the deal, arguing that the company’s value had been reduced.

“The process starts over,” a trader said. “They’ll look to unload the segment when market conditions improve.”

New York-based cosmetics producer Revlon’s paper improved.

The 5¾% senior notes due 2021 picked up 5¾ points to close at 55¾ bid. The 6¼% senior notes due 2024 gained 1½ points to close at 20 bid.

Diebold rises

Meanwhile, Diebold’s notes ended the day rising, traders said.

The 8½% senior notes due 2024 tacked on 2¼ points to close at 67¾ bid.

The gains for the North Canton, Ohio-based connected commerce solutions name came despite the top line disappointments in its first-quarter earnings report.

The company showed an earnings loss of 34 cents per share, wider than what analysts had predicted at a 28 cents per share loss.

Revenues missed the mark at $910.7 million.

The company touted improvements in its profitability and cash flow, as well as its liquidity situation as the market weathers the coronavirus pandemic.

Mallinckrodt trades off

Pharmaceutical name Mallinckrodt’s issues weakened throughout the day, market sources said.

The 5¾% senior notes due 2022 slid 8¼ points to close at 35¾ bid. The 5 5/8% senior notes due 2023 chalked off 4¾ points to close at 24 bid.

Before the open on Tuesday, the Staines-upon-Thames, England-based drug producer was another name to release its first-quarter earnings.

Earnings were reported a $1.64 per share profit, topping the consensus estimate of a $1.41 per share profit.

Revenues fell just shy of predictions at $665.8 million.

Despite the positive top line, the market focused on the company’s dropping sales figures, namely in its top-selling Acthar Gel.

Dublin-based generics maker Endo’s paper tracked higher.

The 6% senior notes due 2025 added 1½ points to close at 72 bid. The 6% senior paper due 2023 was lifted 1½ points to close at 75½ bid.

Oil gains

Continuing gains for oil futures led to positive trends in distressed energy names, trader said.

West Texas Intermediate crude oil futures for June delivery spiked $4.17 to end the session at $24.56 per barrel.

North Sea Brent crude oil futures for July delivery finished at $30.97 per barrel after a $3.77 rise.

Houston-based independent oil and gas producer Occidental Petroleum’s notes followed futures upward.

The 2.9% senior notes due 2024 gained 4 points to close at 80 bid. The 2.7% senior notes due 2022 rose 3¾ points to close at 91 bid.

Denver-based producer Whiting Petroleum’s issues diverged.

The 6¼% senior notes due 2023 garnered 1 point to close at 10½ bid. The 6 5/8% senior notes due 2026 dipped 1 point to close at 9½ bid.

Oklahoma City-based peer Chesapeake Energy’s paper also saw mixed activity.

The 5 3/8% senior notes due 2021 held level at 2 bid. The 11½% senior paper due 2025 gained ½ point to close at 4 bid.

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