Hertz rebounds as company touts turnaround plan; Cobalt eyed post-earnings; Valeant gives back

By Stephanie N. Rotondo

Seattle, Aug. 9 – Fresh earnings continued to be the main driver of distressed bonds in midweek trading.

Hertz Corp., for instance, reported its latest quarterly results late Tuesday. And while the numbers missed expectations, the company’s assertions that its turnaround plan was going well seemed to appease investors. As such, a trader said the company’s bonds “rebounded late” in Wednesday’s session.

Cobalt International Energy Inc. released its second-quarter earnings late Tuesday. Come Wednesday, the oil and gas company’s convertible bonds were trading mixed.

Meanwhile, Valeant Pharmaceuticals International Inc.’s debt was “reversing from yesterday,” a trader said. The bonds had moved up in the previous session after posting better-than-expected results.

The market also reacted positively to the company’s comments regarding its plan to cut $5 billion in debt within a year. With the deadline approaching in February, management said it was on track to hit, or even surpass, that mark.

But in midweek trading, the 6 1/8% notes due 2025 were seen slipping a point to 84½.

A trader noted that the weakness in Valeant coincided with an overall softer tone for the day.

Names like California Resources Corp. and Denbury Resources Inc. followed along with the day’s downward trend, according to market sources.

At one desk, a trader said California Resources; 8% second-lien notes due 2022 declined another 1½ points to finish at 56¾, on “pretty heavy volume.”

Another source pegged the paper at 58 bid, a loss of 1¼ points.

As for Denbury, its 5½% notes due 2022 waned “about a point” to 52¼, a trader said.

In the telecom space, Windstream Holdings Inc.’s bonds took a tumble, though there was no fresh news to act as a catalyst.

A trader called the 7¾% notes due 2020 4 points lower at 88, while the 6 3/8% notes due 2023 lost 2 points, closing at 79.

A second source deemed the 6 3/8% notes off 1½ points at 80 bid.

Hertz hustles

Hertz’s 5½% notes due 2024 ticked up a touch on Wednesday, as investors reacted well to the company’s update on its turnaround plan.

A trader said the bonds pushed up half a point to 83.

Though the company’s latest earnings release didn’t give investors much to go on, the rental car company’s management assured them that turnaround efforts were on track.

Its focus is a fleet of depreciating vehicles, which tends to way down the company’s bottom line. But the company is working to transform its fleet, management said.

“Of course, the hard work always comes before the pay off as reflected in our second quarter results, where increased spending to fix areas of weakness and invest in areas of opportunity were exacerbated by a challenging vehicle residual environment in the U.S.,” said Kathryn Marinello, chief executive officer, in the earnings release.

For the quarter, Hertz posted a loss of 63 cents on revenue of $2.22 billion.

Analysts polled by Thomson Reuters had forecast a loss of 20 cents on revenue of $2.22 billion.

The company said its wider-than-expected loss was mainly due to increased vehicle depreciation, which was 27% higher than that seen in the same quarter of 2016.

Cobalt trades mixed

A trader said Cobalt International’s 2.625% convertible notes due 2019 “improved nicely” in midweek trading, moving up to 30.375 from previously levels around 29.

However, he added that the 3.125% convertible notes due 2024 “traded in a little bit,” ending at 25.5 bid, 25.75 offered.

He noted that the debt had been around 26.

“It looks like there was a large seller and a lot of buyers around,” he remarked, accounting for why that issue was weaker while the 2.625% convertibles were higher.

Cobalt’s equity finished the day unchanged at $2.25.

The Houston-based oil and gas company reported second-quarter earnings late Tuesday, showing a net loss of $185.6 million, or $6.28 a share.

On an adjusted basis, the loss per share narrowed to $2.39.

Revenue was $13.7 million.

© 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.