Hertz notes jump as stock offering floated; American Airlines rises in travel space

By James McCandless

San Antonio, June 12 – As the market settled for the week, the distressed debt space remained fixed on names tied to potential economic weakness.

Hertz Global Holdings, Inc.’s notes jumped upward after proposing a plan to sell up to $1 billion in common stock to fund its bankruptcy.

Air travel company American Airlines Group Inc.’s issues rose as the company said that its cash burn would stop by the end of the year.

Sector peer United Airlines Holdings, Inc.’s paper was also carried higher.

In the retail space, Party City Holdco Inc.’s notes were active but unchanged after the company released its first-quarter earnings report.

Department store name L Brands, Inc.’s issues varied in direction.

Meanwhile, PG&E Corp.’s paper saw an uptick as the company agreed to give wildfire victims more common stock after bankruptcy.

As oil futures saw a divergence, Occidental Petroleum Corp.’s and SM Energy Co.’s notes were also mixed as Whiting Petroleum Corp.’s improved.

Hertz improves

Hertz’s notes jumped upward as the week came to a close, traders said.

The 6¼% senior notes due 2022 rocketed up 13¾ points to close at 50 bid. The 5½% senior notes due 2024 rose 12½ points to close at 48½ bid.

By the end of the day, about $57 million of the two tranches changed hands.

The increased attention on the Estero, Fla.-based car renter’s structure came after subsidiary Hertz Corp. requested court approval to sell common stock through at-the-market transactions for a total offering price of up to $1 billion, Prospect News reported.

Hertz said that the sale would result in the issuance of more than 246,775,008 shares of common stock.

“This is very rare,” a trader said. “It’s mostly retail investors that are driving this. The stock may end up worth nothing, but if they are convincing people to buy, it’s a good way to raise capital.”

After the close, news broke that the company won approval for the move in bankruptcy court, telling the court that it would warn investors that the stock could “ultimately be worthless.”

Airlines rise

American Airlines’ issues were on the rise, market sources said.

The 3¾% senior notes due 2025 gained 3 points to close at 55¾ bid. The 5% senior notes due 2022 were lifted 5 points to close at 66 bid.

On Friday morning, the Fort Worth-based airline announced that it expects see cash burn drop to zero by the end of the year.

For June, the company expects to burn $40 million per day.

Concurrently, American Airlines said that net bookings have been positive since the first week of May.

“All of this is contingent on the current trend line, which goes out the window if there’s a second wave of coronavirus,” a trader said.

For its $4.75 billion loan from the federal government, the airline offered a portion of its loyalty program as collateral.

Chicago-based sector peer United’s paper was also carried higher.

The 5% senior notes due 2024 picked up 1¼ points to close at 83¼ bid. The 4¼% senior paper due 2022 improved by 2¾ points to close at 87 bid.

Party City active, flat

In the retail space, Party City’s notes were active but ultimately unchanged, traders said.

The 6 1/8% senior notes due 2023, while pushing up to 20½ bid during the session, held level to close at 20 bid.

As the session started on Friday, the Elmsford, N.Y.-based party supplies retailer released its first-quarter earnings results.

The company reported a loss per share of 28 cents, worse than what analysts had expected at a 14 cents per share loss.

Revenues were also underwhelming at about $414 million.

Last month, the company announced a transaction support agreement that would exchange senior notes and reduce its balance sheet by about $450 million.

Columbus, Ohio-based department store owner L Brands’ issues varied in direction.

The 6¾% senior notes due 2036 grabbed 3¼ points to close at 88¼ bid. The 5¼% senior notes due 2028 shaved off ¼ point to close at 82¾ bid.

PG&E better

Utilities provider PG&E’s paper saw an uptick, market sources said.

The 6.05% notes due 2034 rose ¼ point to close at 117¾ bid.

On Friday, the San Francisco-based bankrupt electric utility said in a filing that it would give wildfire victims 22.19% of its common stock upon its emergence from bankruptcy.

The shift is an increase from the 20% that was agreed on in December.

Also this week, the company announced 11 new directors for its board of directors and the retirement of 10 of the 13 current members.

PG&E expects to exit bankruptcy by the end of the month, needing the approval of its bankruptcy judge to meet the goal.

To fund the exit, the company expects to raise $5.75 billion from the public sale of common stock and equity units and $3.25 from private stock sales.

Oil diverges

Oil futures saw a divergence, matched by the movements of distressed energy names, traders said.

West Texas Intermediate crude oil futures for July delivery shed 8 cents to finish the week at $36.26 per barrel.

North Sea Brent crude oil futures for August delivery ended Friday at $38.73 per barrel after an 18 cent pickup.

Houston-based independent oil and gas producer Occidental Petroleum’s notes drifted in different directions.

The 2.9% senior notes due 2024 added 1 point to close at 83½ bid. The 2.7% senior notes due 2022 closed level at 91 bid.

SM Energy, another Houston-based producer, saw its issues trade mixed.

The 6¾% senior notes due 2026 improved by 1½ points to close at 53½ bid. The 6 1/8% senior notes due 2022 dipped 1¼ points to close at 70¾ bid.

Denver-based peer Whiting Petroleum’s paper improved.

The 6¼% senior notes due 2023 edged up ¼ point to close at 16¾ bid. The 6 5/8% senior notes due 2026 gained 1 point to close at 16 bid.

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