Firmer oil prices boost energy names; car-rental bonds in a skid; Penney paper mostly stable after Friday fall

By Paul Deckelman

New York, May 15 – Amid a generally firmer high-yield market on Monday, traders in the bonds of stressed or distressed companies said that still-struggling energy names like California Resources Corp. and EP Energy gained solidly as world crude oil prices strengthened for a second consecutive session following last Thursday’s big slide.

But bonds of car-rental companies such as Hertz Global Holdings Inc. and Avis Budget Group Inc. were clearly in a skid, hurt by an overall downturn in that vehicle-rental sector ever since industry leader Hertz reported disappointing quarterly numbers last week. Critics note the loss of resale value among the rental giants’ fleets, as well as the rise of competition such as Uber and more recently, General Motors’ ride-sharing service.

The recently embattled retailing sector seemed to stabilize on Monday after having been hammered down on Friday. J.C. Penney Co. Inc., which led the way downward on Friday after reporting a wider-than-expected quarterly loss and lower sales numbers, was seen having at least braked its slide, for the moment.

Oil names up on crude gains

A trader said that a second day of surging world crude oil prices, bouncing back after Thursday’s big loss, helped carry the energy names higher on Monday.

The sector’s bellwether credit – Los Angeles-based exploration and production company California Resources’ 8% notes due 2022 – reflected that better position.

A trader opined that “with oil better today, California Resources traded pretty well on that news.”

He saw the 8% notes up 2½ points on the day, to 77¾ bid. More than $11 million traded.

EP Energy’s 8% notes due 2025 jumped by nearly 2 points, closing at 90 and 3/8 bid.

More than $15 million of the Houston-based oil and natural gas operator’s credits traded Monday.

Other sector names showing improvement included MEG Energy Corp.’s 7% notes due 2024, which gained 1¼ points to close at 88 bid.

Denbury Resources’ ¾% notes due 2021 firmed to 76½ bid, up ¾ point on the day.

The price rise in those credits coincided with a second straight day of rising oil prices.

The benchmark U.S. crude oil grade, West Texas Intermediate for June delivery, was up $1.01per barrel in Monday trading on the New York Mercantile Exchange, settling at $48.85.

That was on top of Friday’s 70 cent gain – which represented an effort to bounce back from Thursday’s $2.30 per barrel slide.

CGG on the rebound

Another energy-oriented name seen better was Paris-based CGG SA, which provides seismic and geophysical analysis services to energy companies.

On Friday, its bonds had fallen in response to the statement by the company – currently in the midst of trying to negotiate better terms with its bondholders – that it had elected not to make a $12.4 million interest payment due May 15 on its 5 7/8% senior notes due 2020, instead invoking the 30-day grace period.

That caused its widely traded 6½% notes due 2021 to fall 1½ points, ending at 43½ bid – but on Monday, those bonds moved back up to the 45 bid level recovering all of their lost ground.

“On Friday, they had gotten down to as low as 41¼,” another trader said, “so those bonds were better today.”

Car rental names clobbered

While energy seemed to be sizzling, car-rental bonds were fizzling, laid low by a combination of continued investor reaction to poor numbers recently posted by industry giant Hertz, overall slim profit margins in the industry, and the rise of competitors such as Uber and GM’s new ride-sharing service.

Hertz’s 5½% notes due 2024 dropped by ¾ point, to 78 bid, with over $14 million traded, while its 5 7/8% notes due 2020 lost ½ point, ending at 90¾ bid, with over $11 million traded.

Hertz’s chief rival, Avis, did even worse.

Its 6 3/8% notes due 2024 lost 2¼ points on the day to close at 97 bid, with $16 million traded.

Its 5½% notes due 2023 ended down a deuce on the day bid, on turnover of $1 million.

Penney paper stabilizes

One of Friday’s key losers in active trading, J.C. Penney’s notes, seemed to stop their fall on Monday.

While a trader said the Plano, Texas-based department store retailer’s longest issue, its 7.40% bonds due 2037, lost 1 point to end at 79 ½ bid, he said “the volume really wasn’t there.”

Another trader said Penney’s 5 7/8% notes due 2023 were unchanged at par, while its most widely held issue, the 5.65% notes due 2020, held steady at 100 1/8 bid.

Sector peer Neiman Marcus Group’s 8% notes due 2021 – 3-point losers on Friday in active trading – eased by 5/8 point Monday to 53 1/8 bid,” with “just a handful trading,” a market source said.

© 2015 Prospect News.
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