American Airlines notes rise despite posting loss; Hertz paper eyed in travel space

By James McCandless

San Antonio, Oct. 22 – The distressed debt space entered the second half of the week with a focus on travel names.

American Airlines Group, Inc.’s notes rose despite the company reporting a loss for the third quarter.

Sector peer United Airlines Holdings, Inc.’s issues dropped.

Vehicle rental name Hertz Global Holdings, Inc.’s paper varied in direction after announcing the closure of its car sales locations.

In the retail space, PetSmart Inc.’s notes were under water as the company prepares to enter a term loan.

Department store chain Nordstrom, Inc.’s issues fell.

On a day of improving oil futures, Occidental Petroleum Corp.’s and SM Energy Co.’s paper mirrored those movements while Gulfport Energy Corp.’s notes diverged.

Pharmaceuticals company Mallinckrodt plc’s issues were spotted pushing higher.

Airlines in focus

Air travel name American Airlines’ notes rose on Thursday, traders said.

The 5% senior notes due 2022 improved by 2¾ points to close at 72 bid. The 11¾% senior notes due 2025 grabbed 1¼ points to close at 101 bid.

The gains came for the Fort Worth-based airline despite showing $2.4 billion loss in the third quarter.

The company reported a loss per share of $5.54, which was better than what analysts expected at $5.62 per share.

Reported revenues also outpaced expectations, though were worse year over year, at about $3.17 billion.

The company also said that its daily cash burn rate would fall to $25 million to $30 million in the fourth quarter, below the $44 million per day rate that was seen in Q3.

American also continued to push for new industry stimulus, saying that the proposed second round of $25 billion is critical to the future of the company.

U.S. House speaker Nancy Pelosi, D-Calif., has said that a deal on an all-around stimulus package could come “pretty soon.”

“Even with the stimulus, the demand just isn’t there right now,” a trader said. “Airlines aren’t going to recover fully for some time.”

Chicago-based sector peer United Airlines’ issues dropped.

The 5% senior notes due 2024 shaved off ½ point to close at 89¼ bid. The 4¼% senior notes due 2022 lost ¼ point to close at 93 bid.

Hertz varies

Vehicle rental name Hertz’s paper varied in direction, market sources said.

The 6¼% senior notes due 2022 shed ½ point to close at 41½ bid. The 5½% senior paper due 2024 picked up ¼ point to close at 43 bid.

On Wednesday, news broke that the Estero, Fla.-based car rental services provider has closed all 75 of its U.S. car sales locations.

The company said that those locations would cease operations on Thursday.

Earlier in the week, Hertz selected executive Alexandra Brooks as its new chief accounting officer.

Toward the end of the day on Friday, Hertz secured commitments for $1.65 billion of debtor-in-possession financing and has filed a motion for approval of the financing in bankruptcy court.

The financing is being provided by some of the company's prepetition first-lien lenders and is expected to be structured as a delayed-draw term loan debtor facility.

Up to $1 billion can be used toward vehicle acquisitions in the U.S. and Canada while $800 million can be used for working capital and general corporate purposes.

PetSmart, Nordstrom dip

In the retail space, PetSmart’s notes were under water, traders said.

The 8 7/8% senior notes due 2025 chalked off ¼ point to close at 104¼ bid. The 5 7/8% senior notes due 2025 were pushed down ¼ point to close at 103 bid.

The Phoenix-based pet supplies name’s structure has seen increased attention over the last few trading days as it preps the sale of a $2.3 billion term loan.

Seattle-based department store chain Nordstrom’s issues fell.

The 5% senior notes due 2044 gave up ¼ point to close at 75¼ bid.

Oil tranches improve

On a day of improving oil futures, distressed energy tranches mirrored those movements, market sources said.

West Texas Intermediate crude oil futures for December delivery picked up 61 cents to finish at $40.64 per barrel.

North Sea Brent crude oil futures for December delivery closed at $42.46 per barrel after a 73 cent spike.

Houston-based independent oil and gas producer Occidental Petroleum’s paper rose.

The 2.9% senior paper due 2024 added 2½ points to close at 90½ bid. The 2.7% senior notes due 2022 tacked on 1 point to close at 96½ bid.

Denver-based producer SM Energy’s notes followed futures upward.

The 5% senior notes due 2024 gained ½ point to close at 49 bid. The 6¾% senior notes due 2026 pushed up 1 point to close at 41½ bid.

Oklahoma City-based E&P company Gulfport Energy’s issues diverged.

The 6 5/8% senior notes due 2023 edged ¼ point lower to close at 58½ bid. The 6 3/8% senior notes due 2025 gained 2½ points to close at 58 bid.

Mallinckrodt higher

Pharma name Mallinckrodt’s paper was spotted pushing higher, traders said.

The 5¾% senior notes due 2022 tacked on ½ point to close at 36 bid. The 5½% senior paper due 2025 garnered 1 point to close at 36 bid.

The Staines-upon-Thames, England-based drug producer’s paper shifted into focus on Wednesday after the Department of Justice announced that industry giant Purdue Pharma had agreed to plead guilty to criminal charges related to the opioid epidemic.

Purdue faces penalties of about $8.3 billion.

Last week, Mallinckrodt filed for Chapter 11 bankruptcy after facing similar claims over the marketing of opioids.

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