Hertz notes lower after analyst input; Chesapeake trades lower amid bankruptcy talk

By James McCandless

San Antonio, June 9 – Weakness in travel and energy names was the main focus of the distressed debt market on Tuesday.

Hertz Global Holdings, Inc.’s notes moved lower after analysts warned against investing in the name’s common stock after bankruptcy.

Meanwhile, in oil and gas, Chesapeake Energy Corp.’s issues were pushed down amid talk of an upcoming bankruptcy filing.

While oil futures saw improvements, Occidental Petroleum Corp.’s and Valaris plc’s paper varied in direction while Whiting Petroleum Corp.’s notes dipped.

Real estate name CBL & Associates Properties, Inc.’s issues gained as more retailers reopen locations shuttered by the coronavirus pandemic.

Sector peer Washington Prime Group Inc.’s paper was under pressure.

Elsewhere, software name Exela Technologies, Inc.’s notes bounced after releasing its fourth-quarter earnings.

Utilities provider PG&E Corp.’s issues were active but unchanged as the company plans funding for its bankruptcy exit.

Hertz lower

Hertz’s notes were seen moving lower by the session’s end, traders said.

The 6¼% senior notes due 2022 lost 2¼ points to close at 37¾ bid. The 5½% senior notes due 2024 dipped 1 point to close at 39½ bid.

The 6¼% notes saw about $26 million trading.

During the Tuesday session, analysts at Deutsche Bank and Barclays both warned against investing in the Estero, Fla.-based car rental company’s common stock.

Both analysts said that despite positive outlooks on the travel industry and the economic recovery as a whole, traders should be wary of putting their money in the bankrupt name.

At the time of its filing, Hertz reported $14 billion in vehicle debt and $6 billion in corporate debt.

“How do you expect them to cover that,” a trader asked. “They have to use the equity. Then bondholders have to be satisfied before stockholders.”

In the previous two trading days, the company’s structure was boosted by the market’s hopes of a short-term economic recovery as economic data indicates that more people are going to travel domestically.

Chesapeake down

Meanwhile, in the oil and gas space, Chesapeake Energy’s issues were pushed down, market sources said.

The 11½% notes due 2025 fell 3¼ points to close at 5¼ bid. The 5 3/8% senior notes due 2021 shed 1¼ points to close at 2¾ bid.

Reports indicated Tuesday that the Oklahoma City-based independent oil and gas producer is preparing to file for Chapter 11 bankruptcy.

The move would force the company to reckon with its $9 billion debt load.

Talks with lenders have started, so far centered on an interest payment due June 15 that the company could skip in order to enter a forbearance period.

“The stock has been all over the place despite everything,” a trader said.

OPEC’s decision to further supply cuts to match weakened demand sent oil names higher en masse on Monday.

Oil names vary

While oil futures saw improvements, distressed energy tranches saw varying directions, traders said.

West Texas Intermediate crude oil futures for July delivery moved up 75 cents to $38.94 per barrel.

North Sea Brent crude oil futures for August delivery closed at $41.18 per barrel after a 38 cent gain.

Houston-based producer Occidental Petroleum’s paper varied.

The 2.9% senior notes due 2024 gave back 1¼ points to close at 86 bid. The 2.7% senior notes due 2022 held level to close at 95¾ bid.

London-based contract driller Valaris’ notes also diverged.

The 5.2% senior notes due 2025 garnered ½ point to close at 12 bid. The 7¾% senior notes due 2026 declined by 4¼ points to close at 11 bid.

Denver-based peer Whiting Petroleum’s issues dipped.

The 6¼% senior notes due 2023 were pushed down 1 point to close at 19 bid. The 6 5/8% senior notes due 2026 lost 2 points to close at 17¼ bid.

CBL notes gain

Property name CBL’s paper gained ground as the afternoon ended, market sources said.

The 5¼% senior notes due 2023 jumped up 3½ points to close at 31½ bid. The 4.6% senior notes due 2024 rose 4¼ points to close at 30¾ bid.

The two tranches combined to see about $17 million changing hands.

The Chattanooga, Tenn.-based real estate investment trust’s structure saw positivity as more retailers announce the reopening of physical locations across the country.

The temporary closures in March and April were implemented to comply with government mandates about slowing the spread of the coronavirus.

News broke on Tuesday that department store chain Macy’s had reopened 450 stores in different capacities.

Columbus, Ohio-based sector peer Washington Prime’s notes were under pressure.

The 6.45% senior notes due 2024 shaved off ½ point to close at 60 bid.

Exela bounces

Elsewhere, software name Exela’s issues bounced higher, traders said.

The 10% notes due 2023 shot up 9 points to close at 30 bid.

On Tuesday morning, the Irving, Tex.-based business software developer released its earnings report for the fourth quarter.

The company reported a loss of 34 cents per share, wider than what analysts expected at a 15 cents per share loss.

Revenues came in at $393.6 million, beating expectations.

PG&E active, flat

Utilities provider PG&E’s paper was active but ultimately unchanged, market sources said.

The 6.05% notes due 2034 closed level at 118½ bid.

The San Francisco-based electric utility said on Monday that it expects to hold public offerings of common stock and equity units as part of its expected emergence from Chapter 11 bankruptcy.

The offerings are expected to generate $5.75 billion in proceeds, which it expects to combine with $3.25 billion from private sales of common stock.

Equity units are expected to consist of two components, including a prepaid forward purchase contract to purchase common stock and specified U.S. treasury securities.

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