PG&E notes gain after company exits bankruptcy; Hertz trades up on analyst upgrade

By James McCandless

San Antonio, July 2 – On a half-day to round out a short Fourth of July week, utilities and travel names took up much of the attention in the distressed debt market.

PG&E Corp.’s notes gained ground after the company announced that it had exited Chapter 11 bankruptcy.

Car rental name Hertz Global Holdings, Inc.’s issues moved up after receiving an analyst upgrade backed by conditions in the used car market.

Elsewhere, travel company American Airlines Group Inc.’s paper varied after announcing that it would slash international capacity by 25% next year.

Sector peer United Airlines Holdings, Inc.’s notes also diverged.

In the oil and gas space, Denbury Resources Inc.’s issues saw mixed results after a pair of ratings downgrades.

Amid gains for oil futures, Chesapeake Energy Corp.’s and Whiting Petroleum Corp.’s paper improved while Occidental Petroleum Corp.’s notes showed mixed results.

Meanwhile, Exela Technologies, Inc.’s issues were active but unchanged in the wake of its first-quarter earnings results.

PG&E gains

PG&E’s notes gained ground at the end of the Thursday session, traders said.

The 2.1% notes due 2027 picked up ¾ point to close at 99¾ bid. The 2½% notes due 2031 rose 1 point to close at 99¼ bid.

Late Wednesday, the San Francisco-based electric utility announced that it had emerged from Chapter 11, completing its restructuring process and implementing the plan of reorganization that was confirmed in bankruptcy court on June 20, Prospect News reported.

The company has also now funded the Fire Victim Trust to satisfy claims of individual wildfire victims and others.

The payment schedule for the trust calls for payments of $5.4 billion in cash and shares representing 22.19% of PG&E’s common stock on the plan effective date of July 1; $1.35 billion in cash in two installments in 2021 and 2022; and certain other rights.

“I’m surprised they were able to keep the plates spinning for this long,” a trader said. “There were a lot of moving parts to the restructure that meant a lot of uncertainty.”

Hertz up

Car rental name Hertz’s issues ended up on the day, market sources said.

The 6¼% senior notes due 2022 improved by ¾ point to close at 32¼ bid. The 5½% senior notes due 2024 gained 1 point to close at 33 bid.

On Thursday morning, the Estero, Fla.-based car rental company received an analyst upgrade from Morgan Stanley.

The analyst said in a note that a combination of economic factors has led to better-than-expected used and new car sales markets.

In the note, the analyst also says that used car prices will probably drop 5% through 2020, going against prior forecasts of a 10% dip.

On Wednesday, reports indicated that Hertz was involved with a disagreement with its creditors over the future of its fleet of about 494,000 cars.

While the company wants to jettison the leases of about 144,000 cars, lenders want it to keep making payments on every lease.

Airlines eyed

Elsewhere, American Airlines’ paper was flat to higher, traders said.

The 5% senior notes due 2022 tacked on ¾ point to close at 60 bid. The 3¾% senior notes due 2025 held level at 48 bid.

News broke on Thursday that the Fort Worth-based airline has forecasted a 25% reduction in international flight capacity for 2021.

The company also nixed a handful of international routes on an expected decrease of demand.

On Wednesday, American Airlines said that it was overstaffed by about 8,000 persons and warned that layoffs could be necessary depending on market conditions.

Recently, American Airlines said it would restart filling planes to capacity starting in July.

Chicago-based sector peer United Airlines’ notes also diverged.

The 5% senior notes due 2024 shaved off ½ point to close at 81¾ bid. The 4¼% senior notes due 2022 improved by 2½ points to close at 90 bid.

Denbury mixed

In the oil and gas space, Denbury Resources’ issues saw mixed results, market sources said.

The 5½% senior subordinated notes due 2022 shed 3 points to close at ½ bid. The 9% notes due 2021 added ½ point to close at 41 bid.

In the last 24 hours, the Plano, Tex.-based independent oil and gas producer has received two ratings downgrades after announcing that it would skip an $8 million interest payment on its 6.375% convertible senior notes due 2024.

After the Wednesday close, Moody’s Investors Service lowered the company’s probability of default rating, corporate family rating and issue-level ratings.

On Thursday, S&P Global ratings made cuts to issue-level ratings.

Both agencies said that there is a high probability that the company would default on its obligations.

Oil futures gain

Amid gains for oil futures, distressed energy names trended similarly, traders said.

West Texas Intermediate crude oil futures for August delivery shot up 83 cents to settle at $40.65 per barrel.

North Sea Brent crude oil futures for September delivery finished the session at $43.14 per barrel after a $1.11 pickup.

Oklahoma City-based producer Chesapeake Energy’s paper followed futures upward.

The 11½% paper due 2025 rose ¼ point to close at 11¾ bid. The 7% senior notes due 2024 grabbed ¾ point to close at 4 bid.

Denver-based peer Whiting Petroleum’s notes moved along a similar track.

The 6¼% senior notes due 2023 added ½ point to close at 21¾ bid. The 6 5/8% senior notes due 2026 jumped up 4 points to close at 22 bid.

Houston-based producer Occidental Petroleum’s issues differed in direction.

The 2.9% senior notes due 2024 closed level at 86½ bid. The 2.7% senior notes due 2022 picked up 2 points to close at 95 bid.

Exela active, flat

Meanwhile, Exela’s paper was active but unchanged as the day wound down, market sources said.

The 10% paper due 2023 finished level at 21½ bid.

Secondary prices for the Irving, Tex.-based business software company’s bonds were lower on Wednesday after the company released its first-quarter earnings report.

The company showed an 8 cents per share loss, a bigger loss than what analysts had predicted at a 5 cents per share loss.

Revenues also failed to meet expectations at $365.5 million.

In an earnings call, executives said that they expect the company to be cash flow positive by the end of the year.

© 2015 Prospect News.
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