Hertz’s new issue stirs existing bonds higher; Intelsat lower ahead of exchange; Atwood active, but flat

By Colin Hanner

Chicago, May 31 – Movement trended higher in the distressed debt market for Hertz Corp.’s existing bonds on Wednesday, a market source said, as bondholders prepared for the rental-car company’s upsized new issue, which priced late in the day.

An expected offering of five-year second-lien notes for Hertz was upsized to $1.25 billion on Wednesday afternoon, and existing issuances were up more than 1 point across the board, market sources said.

In energy, offshore drilling contractor Atwood Oceanics, Inc. remained active a day following a takeover from Ensco plc, which acquired the Houston-based offshore drilling contractor for $839 million in an all-stock transaction, the companies said in a news release on Tuesday.

Atwood’s bonds, however, were nearly unchanged, while Ensco’s bonds were down a round number.

The downturn in oil continued into Wednesday, though steeper losses plagued crude oil futures. Noble Holdings International Ltd. was lower, as was California Resources Corp.

Ahead of its exchange offer deadline on Wednesday at midnight ET, Intelsat SA was down and active, stirring speculation that another pushback may not occur.

Franklin, Tenn.-based hospital group, Community Health Systems, Inc., which divested five hospitals after the close on Tuesday, was down fractionally in one of its issues, a market source said. Other hospital groups saw some activity, though movement did not stretch far in either direction.

Hertz sees demand ahead of pricing

An upsized $1.25 billion 7 5/8% five-year deal for Hertz lifted existing paper in the secondary market on the session, with the 5 7/8% notes due 2020 trading “more than 50 times,” a market source said.

The notes were up 1 point to 95.

Its 7 3/8% notes due 2021 were up 1½ points to 94½.

And the 6¼% notes due 2019 were up 1/8 point to 100 3/8, a market source said.

Proceeds of the offering will be used to either refinance existing debt or redeem current debt, as the rental car company struggles to navigate a space that continues to struggle with operating and pricing issues, not to mention the shifting landscape of the automobile industry, namely ride-sharing companies.

Atwood stays active

Following a double-digit climb on Tuesday after a takeover from Ensco plc, Atwood Oceanics remained active, though was nearly unchanged on the day, market source said.

Its 6½% notes due 2020 were unchanged at par-and-a-half, a market source said.

And Ensco’s 4½% notes due 2024, which were virtually unchanged after the takeover was announced, were down 1 point to 82½, a market source said.

Oil goes low

Falling further below the $50 per barrel benchmark, West Texas Intermediate crude oil was down more than 2% during Tuesday’s trading, hovering just below $48.50, a remarkably larger loss compared to the start of the week.

Exploration and production companies followed the broader trend, with California Resources Corp.’s 8% notes due 2022 ticking 1½-points lower to 88½, a trader said.

Offshore driller Noble Holdings’ 7¾% notes due 2020 were down 1 point to 88½.

And Canadian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were down 1¼ points to 87.

Intelsat down on looming deadline

Ahead of its exchange offer deadline of midnight ET on Wednesday, Intelsat Jackson Holdings SA 7¼% notes due 2020 traded on “tons” of volume, a market source said, losing 1 point to finish at 90½.

Those notes are included as one of three series of Intelsat Jackson notes included as part of the exchange offer.

Wednesday’s deadline comes more than a month after the first exchange offer deadline, which has since been pushed back three separate times.

Community Health sheds hospitals

After close on Tuesday, Community Health Systems signed an agreement to sell five Pennsylvania hospitals, which are expected to close in this year’s third quarter, the company said in a news release.

The five-hospital divestment is part of a larger plan to shed 30 hospitals, as discussed in the company’s first quarter earnings call.

That did not do much to excite bondholders in the secondary market, particularly the 7 1/8% notes due 2020, which were down 3/8 point to 98 5/8.

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