Hertz notes trade mixed on funding proposal; Transocean up; Diamond Sports declines

By Cristal Cody

Tupelo, Miss., May 4 – Hertz Corp.’s bonds were mixed in light trading on Tuesday after the company reported it received a revised proposal for funding the company’s Chapter 11 plan of reorganization.

Hertz’s 7% senior notes due 2028 fell about 1½ points to 94½ bid, a source said.

The issue has improved from trading in the 48 bid range as the year opened.

Hertz’s 5½% notes due 2024 were last seen in the secondary market on Monday at 106 bid.

The notes traded at the start of the year at 53½ bid.

Hertz said in a news release on Tuesday that it received a revised proposal from affiliates of Knighthead Capital Management, LLC, Certares Opportunities LLC and Apollo Capital Management, LP to provide equity capital required to fund its exit from Chapter 11 bankruptcy.

On March 2, the Estero, Fla.-based car rental operator filed a joint Chapter 11 bankruptcy plan of reorganization with a $4.2 billion buyout offer from Knighthead and Certares in the U.S. Bankruptcy Court for the District of Delaware.

Hertz announced on April 3 that it had selected an enhanced proposal with greater creditor support from Centerbridge Partners, LP, Warburg Pincus LLC, and Dundon Capital Partners, LLC to provide the equity capital to fund its Chapter 11 exit.

Under those proposals, Hertz said it would eliminate approximately $5 billion of debt, have over $2 billion of global liquidity and completely eliminate all corporate debt on its European business.

On April 21, Hertz filed a fourth modified Chapter 11 bankruptcy plan of reorganization and disclosure statement.

A hearing to confirm that plan, which implied a total enterprise value for the company of approximately $5.5 billion, was scheduled for June 10.

Hertz said in the statement on Tuesday the latest revised proposal “contemplates funding Hertz's plan of reorganization through direct common stock investments aggregating $2.9 billion, direct preferred stock investments aggregating $1.5 billion and a rights offering to raise $1.36 billion.”

The revised proposal also includes an amended plan of reorganization that contemplates payment in full of all secured and unsecured funded debt and provides holders of common stock with 50 cents per share in cash and either 10-year warrants for an aggregate of 10% of the reorganized company or, for eligible stockholders, the possibility of subscribing for shares of common stock in the rights offering.

Hertz said the board will evaluate the revised proposal.

The company filed for Chapter 11 bankruptcy on May 22, 2020.

Transocean higher

Oil prices were mixed again on Tuesday.

North Sea Brent crude oil futures for June deliveries settled unchanged for a third consecutive session at $68.56 a barrel.

West Texas intermediate crude oil futures for June deliveries added $1.20 to settle at $65.69 a barrel.

Overall market tone was mixed.

The iShares iBoxx High Yield Corporate Bond ETF fell 5 cents to $87.13 by the close.

In distressed energy issues, Transocean Inc.’s 8% senior notes due 2027 (Ca/CCC) rose 1½ points to head out at 72½ bid on more than $18 million of bonds traded Tuesday, a source said.

The Vernier, Switzerland-based offshore driller’s 6.8% notes due 2038 (C/CCC-) also climbed 1¾ points to 49½ bid on more than $12 million of secondary supply during the session.

Mallinckrodt declines

Bankrupt pharmaceuticals maker Mallinckrodt plc’s bonds traded lower over the day, a market source said.

The company’s 5¾% notes due 2022 dropped 3 points to 65 bid on $3 million of secondary volume.

Mallinckrodt filed its Chapter 11 plan of reorganization and disclosure statement in the U.S. Bankruptcy Court for the District of Delaware on April 20.

A hearing on the plan is scheduled for May 26.

The company announced in March that it reached an agreement with a group of first-lien term lenders holding about $1.3 billion of its outstanding first-lien term loans to support its restructuring support agreement.

Mallinckrodt, which has principal offices in Dublin and St. Louis, filed for Chapter 11 bankruptcy on Oct. 12, 2020.

Diamond Sports softens

Elsewhere, Diamond Sports Group LLC’s distressed bonds traded about 1 to 3 points lower on Tuesday, according to a market source.

Diamond Sports’ 5 3/8% senior secured notes due 2026 (B2/CCC+) fell nearly 3 points to 70 bid on under $2 million of paper traded.

The company’s 6 5/8% senior notes due 2027 (Caa2/CCC-) saw heavier activity with $6 million of issues trading more than 1¼ points weaker at 52 1/8 bid.

Diamond Sports’ bonds had rallied in the prior week on reports of potential financing.

In February, parent company Sinclair Broadcast Group, Inc. reported soft guidance for the Chesapeake, Va.-based sports broadcast group along with an interest in liability management initiatives that could include a debt exchange or redemption.

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