Hertz notes trader higher despite ratings downgrade; L Brands gains on market optimism

By James McCandless

San Antonio, April 28 – The Tuesday distressed session saw the market’s attentions remain fixed on retail and energy names.

Hertz Global Holdings, Inc.’s notes were positive despite receiving a ratings downgrade as the overall market carried the name higher.

Meanwhile, retailer L Brands, Inc.’s issues were seen gaining on the same sentiment as the market expressed optimism about a post-coronavirus economy.

Sector peer J.C. Penney Co., Inc.’s paper varied in direction.

In the oil and gas space, Diamond Offshore Drilling, Inc.’s notes improved in the wake of its bankruptcy filing.

As oil futures saw diverging activity, Occidental Petroleum Corp.’s and Valaris plc’s issues tracked upward while Whiting Petroleum Corp.’s paper slipped.

Real estate company Realogy Holdings Corp.’s notes saw mixed results a day after the company announced a lawsuit surrounding an asset sale.

Elsewhere, in the utilities space, PG&E Corp.’s issues picked up steam.

Hertz notes trade up

Hertz’s notes ended the afternoon on a positive note, traders said.

The 6¼% senior notes due 2022 picked up 3½ points to close at 32 bid. The 5½% senior notes due 2024 added 1½ points to close at 25½ bid.

During the Tuesday session, S&P Global Ratings issued a blanket downgrade to its ratings for the Estero, Fla.-based vehicle rental company and Hertz Corp. to CCC- from B-.

The agency said that the move is based on the increased likelihood that the company will complete a distressed exchange or a partial debt restructuring.

The company’s debt structure was carried higher, however, on market optimism of a post-coronavirus economy as states weigh lifting stay-at-home mandates.

“For a lot of these names, the damage has largely been done,” a trader said.

Late last week, news broke that Hertz hired Moelis & Co. as restructuring advisers as the company tries to prevent bankruptcy.

L Brands gains

Meanwhile, retailer L Brands’ issues were seen gaining, market sources said.

The 6¾% senior notes due 2036 rose 1½ points to close at 71½ bid. The 5¼% senior notes due 2028 jumped up 4¼ points to close at 70¼ bid.

The Columbus, Ohio-based retail name’s issues were also carried higher on overarching positivity despite a ratings downgrade.

Though the market latched onto the prospect of retail names opening their locations again, the company has yet to officially announce a reopening timeline.

Near the end of the day, Moody’s Investors Service slashed the company’s corporate family rating, probability of default rating, speculative grade liquidity rating and issue-level ratings.

Moody’s said that the downgrades reflect an increased risk to the completion of the sale of a 55% stake in its Victoria’s Secret unit.

The sale came into question recently after the buyer, private equity firm Sycamore Partners, sought to terminate the sale on grounds of decreased value of the company.

Plano, Tex.-based department store chain J.C. Penney’s paper varied.

The 5 7/8% senior secured notes due 2023 lost ½ point to close at 46¾ bid. The 5.65% senior paper due 2020 pushed up 3½ bid.

Diamond Offshore better

In the oil and gas space, Diamond Offshore’s notes improved, traders said.

The 3.45% senior notes due 2023 added 1¼ points to close at 10¼ bid. The 4 7/8% senior notes due 2043 tacked on 9½ bid.

Two days after filing for Chapter 11 bankruptcy, the Houston-based offshore contract driller’s notes saw a small recovery.

The company announced that it was filing for bankruptcy in order to restructure and strengthen its balance sheet and achieve a more sustainable debt profile, Prospect News reported.

The collapse of oil prices and the overall weakness of the market due to the pandemic were cited as the main reasons.

The company disclosed $2.6 billion in debt.

In reaction to the news, Moody’s dropped its probability of default rating.

Oil diverges

As oil futures saw diverging activity, distressed energy names trended upward, market sources said.

West Texas Intermediate crude oil futures for June delivery shaved off 44 cents to settle at $12.34 per barrel.

North Sea Brent crude oil futures for June delivery settled at $20.46 per barrel after a 47 cent pickup.

Houston-based independent oil and gas producer Occidental Petroleum’s issues tracked upward.

The 2.9% senior notes due 2024 improved by 2½ points to close at 74 bid. The 2.7% senior notes due 2022 added 1½ points to close at 85½ bid.

London-based contract driller Valaris’ paper also moved along a positive trend.

The 5.2% senior notes due 2025 grabbed 2¾ points to close at 10½ bid. The 7¾% senior paper due 2026 rose 1 point to close at 10½ bid.

Denver-based producer Whiting Petroleum’s notes slipped.

The 6¼% senior notes due 2023 chalked off 1¼ points to close at 9 bid. The 6 5/8% senior notes due 2026 shed 1½ points to close at 9 bid.

Realogy mixed

Real estate company Realogy’s issues saw mixed activity, traders said.

The 5¼% senior notes due 2021 declined by 1 point to close at 82 bid. The 9 3/8% senior notes due 2027 gained 3½ points to close at 66 bid.

The Madison, N.J.-based real estate solutions company’s debt structure has seen heightened activity in the last few trading days after announcing a lawsuit against Madison Dearborn Partners, LLC and Sirva Worldwide, Inc. to enforce a $400 million purchase agreement.

Realogy and Sirva are embroiled in competing contentions about closing conditions on an agreement to sell Realogy’s Cartus Relocation Services segment that was struck on Nov. 7, 2019.

PG&E notes rise

Elsewhere, in the utilities space, PG&E’s paper picked up steam, market sources said.

The 6.05% bonds due 2034 shifted up ½ point to close at 112½ bid.

As the San Francisco-based bankrupt electric utility enters the home stretch on its way to exiting bankruptcy, it recently announced that chief executive officer William Johnson would retire on June 30.

June 30 is also the target date for the exit.

The utility is soliciting votes for its reorganization plan.

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