Hertz spirals lower as company seeks financial rescue; Rite Aid drops on earnings

By James McCandless

San Antonio, April 16 – The distressed debt space experienced a volatile Thursday as earnings season kicked off.

Hertz Global Holdings, Inc.’s notes spiraled downward as the company seeks a financial rescue package from the government amid the Covid-19 pandemic.

Meanwhile, in the retail space, Rite Aid Corp.’s issues dropped after releasing a lukewarm earnings report.

Sector peer J.C. Penney Co., Inc.’s paper was pushed lower as the company enters talks with creditors over a possible bankruptcy filing.

Satellite operator Intelsat SA’s notes bounced as the company explores its own restructuring options after skipping an interest payment.

Wireline communicator Frontier Communications Corp.’s issues dipped.

While oil futures remained largely unchanged, Occidental Petroleum Corp.’s paper gained, Whiting Petroleum Corp.’s notes varied and Diamond Offshore Drilling, Inc.’s issues cratered.

Manufacturing name Bombardier Inc.’s paper diverged.

Hertz spirals lower

Hertz’s notes spent Thursday spiraling downward, traders said.

The 5½% senior notes due 2024 dropped 10½ points to close at 41½ bid. The 6¼% senior notes due 2022 crashed 15¼ points to close at 51¼ bid.

The Estero, Fla.-based car rental company’s structure saw declines amid reports that it is seeking a financial rescue package amid the market turmoil caused by the coronavirus pandemic.

The company is working to deal with a budget gap of $1 billion to $1.5 billion as the travel industry grinds to a halt amid government stay-at-home orders.

“It’s going to be tricky for them to navigate the market if nobody can drive,” a trader said. “It would also be interesting to know just how much of their securities are backed by their car inventory.”

Toward the end of last month, Hertz started talks with banks on financing options, including new first-lien and second-lien loans and collateralizing its vehicle fleet.

Rite Aid drops

Meanwhile, in the retail space, Rite Aid’s issues sustained a drop, market sources said.

The 6 1/8% senior notes due 2023 gave up 1¾ points to close at 90 bid.

Early Thursday morning, the Camp Hill, Pa.-based drug store chain released its earnings report for the fourth quarter.

The company showed a loss of 37 cents per share, wider than what analysts expected at a 13 cents per share loss.

Revenues, however, beat estimates at $5.73 billion.

Despite the retail sector’s current ailments, the company said that it saw a 33% increase in comparable front-end sales as consumers sought products meant to protect against Covid-19.

Rite Aid also plans to hire an additional 5,000 full-time and part-time workers.

“They’re in a position to improve during all this, which is rare for the sector,” a trader said. “Most retailers are furloughing their people.”

J.C. Penney lower

Sector peer J.C. Penney’s paper was pushed to lower levels, traders said.

The 5 7/8% senior notes due 2023 shaved off ¼ point to close at 46¼ bid. The 8 5/8% paper due 2025 declined by 5 points to close at 9 bid.

Over the last few days, the Plano, Tex.-based department store name has seen headlines swirling as it weighs a potential Chapter 11 bankruptcy filing.

During the Wednesday session, the company announced that it would forego a $12 million interest payment.

As it struggles with a $4 billion debt load and declining sales, the company has hired restructuring adviser AlixPartners LLP to help explore its options.

On March 31, J.C. Penney said that it would furlough its 90,000 retail workers and keep its stores closed indefinitely.

Intelsat up, Frontier dips

Telecom name Intelsat’s notes were reaching higher ground, market sources said.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 improved by 4 points to close at 61½ bid. The 8½% senior notes due 2024 rose 4¼ points to close at 63½ bid.

The 5½% senior notes saw about $16 million change hands.

The Luxembourg-based satellite operator’s structure has bounced from recent dips spurred by its announcement that subsidiary Intelsat Jackson would skip payment on $125 million of interest on the 8½% senior notes due 2024.

Earlier in the week, news broke that the company is seeking financial backers for a DIP loan of about $750 million to remain in operation for a Federal Communications Commission auction of C-band spectrum in December.

Intelsat is slated to reap about $4.85 billion in revenue.

Norwalk, Conn.-based wireline communications name Frontier’s issues also recovered from recent losses.

The 10½% senior notes due 2022 shed ¼ point to close at 31 bid. The 11% senior notes due 2025 also gave back ¼ point to close at 31 bid.

Oil futures rigid

As oil futures finished largely unchanged, distressed energy names bounded in different directions, traders said.

Futures largely remained at the previous day’s levels as OPEC cut its demand forecast.

West Texas Intermediate crude oil futures for May delivery remained unchanged at $19.87 per barrel.

North Sea Brent crude oil futures for July delivery finished at $27.82 per barrel after scraping together 13 cents.

Houston-based independent oil and gas producer Occidental Petroleum’s paper gained.

The 2.9% senior notes due 2024 added ¼ point to close at 72½ bid. The 2.7% senior notes due 2022 grabbed 1¾ points to close at 82½ bid.

Denver-based bankrupt producer Whiting Petroleum’s notes varied in direction.

The 6¼% senior notes due 2023 garnered 1¾ points to close at 10 bid. The 6 5/8% senior notes due 2026 declined by 1 point to close at 9 bid.

Houston-based contract driller Diamond Offshore’s issues cratered.

The 3.45% senior notes due 2023 slid 15¾ points to close at 16 bid. The 7 7/8% senior notes due 2025 cratered 11¾ points to close at 14 bid.

Bombardier diverges

Manufacturing name Bombardier’s paper diverged, market sources said.

The 8¾% senior notes due 2021 rose ½ point to close at 81 bid. The 7½% senior notes due 2024 held level at 72¼ bid.

The Montreal-based aerospace manufacturer’s paper saw weakness on Wednesday after receiving a ratings cut from Moody’s Investors Service.

Slashing its corporate family rating, probability of default rating, senior unsecured ratings and speculative grade liquidity rating, the agency argued that the company’s weak capital structure will be impacted by Covid-19.

Moody’s went on to say that measures such as selling its transportation unit next year would not have much of a positive impact.

Over the last week, the company has started to partially reopen manufacturing facilities it had previously shut due to government orders to slow the spread of the coronavirus.

© 2015 Prospect News.
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