Hertz bonds active, lower as redemption pulled; California Resources, Denbury fail to gain with oil

By Stephanie N. Rotondo

Seattle, July 31 – Trading in the distressed debt space was more muted than not on Monday, with one trader blaming the previous week’s new high-yield bond issues.

Specifically, he said a $925 million offering of 4 7/8% notes due 2028 from United Rentals Inc. was taking center stage.

However, the trader also noted that Hertz Corp.’s debt was on the active side, given that the company said early in the session that it was nixing a planned redemption of the 6¾% notes due 2019.

In response to that news, the company’s bonds dropped anywhere from 1 point to 3¾ points on the day. Its equity, however, took a massive hit after Barclays downgraded the name, closing over 21% lower.

Elsewhere, California Resources Corp.’s 8% second-lien notes due 2022 were deemed “down a little bit,” even as domestic crude oil prices rallied above the $50-mark for the first time in two months.

“They’ve been underperforming based on the recent moves in oil,” a trader said. “It just seems like people are not buying into this oil rally.”

He noted that oil prices had been lower for most of the day.

As for the CRC 8% notes, the trader placed them in a 63½ to 64 context.

Another market source called the issue off a point at 64½ bid.

Denbury Resources Inc. – another oil and gas underperformer – was also weaker, dipping half a point to 59 bid.

Hertz runs

Hertz bonds ran into some trouble on Monday after the company pulled its redemption of its 6¾% notes due 2019.

A trader said the 2019 paper was off a point at 99. The 7.625% second-lien notes due 2022 meantime declined to “99-ish” from around 102 previously.

At another desk, a source saw the 5½% notes due 2024 falling 3¾ points to 83 bid.

On May 30, Hertz announced that it would redeem its $450 million of 6¾% senior notes due 2019 and its $250 million of 4¼% senior notes due 2018 on June 29. But the redemptions were conditioned on Hertz completing an offering of senior second priority secured notes – a $1.25 billion deal that priced May 31.

But while the offering condition was met, other conditions were not met – at least not to the company’s satisfaction.

Though the redemption of the 6¾% notes was nixed, the company did redeem the 4¼% notes, waiving the financing requirement in order to do so. It also paid down its revolving credit facility by $150 million.

Also on Monday, Barclays lowered its rating on the company’s stock to “underweight,” as the investment bank is not expecting the latest quarterly results to be stellar.

Barclays also noted the general headwinds the company is facing.

Hertz is a car rental company based in Estero, Fla.

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