Hertz notes decline after layoff announcement; Valaris bonds drop on bankruptcy talk

By James McCandless

San Antonio, April 21 – Distressed debt was dragged down with equities on Tuesday as energy prices continued to weaken.

Hertz Global Holdings, Inc.’s notes declined after news broke that the company will lay off 10,000 workers due to market weakness.

Elsewhere, in oil and gas, Valaris plc’s issues dropped as reports indicated that the company is preparing to talk with creditors about restructuring.

Sector peer Transocean Ltd.’s paper varied as the company received a ratings downgrade.

More losses for oil futures were the backdrop for Occidental Petroleum Corp.’s notes trailing while Whiting Petroleum Corp.’s issues diverged.

Meanwhile, PG&E Corp.’s paper traded higher as a California regulator pushes for changes in the company’s restructuring plan.

Manufacturing name Bombardier Inc.’s notes were under pressure as it tries to restart production.

In the telecom space, Frontier Communications Corp.’s and Intelsat SA’s issues both saw mixed activity.

Hertz declines

Hertz’s notes were in decline in the Tuesday session, traders said.

The 5½% senior notes due 2024 were docked 2 points to close at 35¾ bid. The 6¼% senior notes due 2022 dropped 9¼ points to close at 42 bid.

After the close on Monday, news broke that the Estero, Fla.-based vehicle rental company would lay off 10,000 workers due to the market weakness spurred on by the coronavirus pandemic.

In a Securities and Exchange Commission filing, the company said that it would incur about $30 million in employee termination costs.

After the news, S&P Global Ratings slashed all of Hertz’s ratings, keeping its ratings on CreditWatch with negative implications.

Last week, the company indicated that it was seeking rescue financing from the government as it sees a substantial reduction in business due to low levels of travel.

Valaris drops

Elsewhere, in the oil and gas space, Valaris’ issues dropped, market sources said.

The 5.2% senior notes due 2025 lost 2 points to close at 8 bid. The 7¾% senior notes due 2026 shaved off ¾ point to close at 9 bid.

During the Tuesday session, reports indicated that the London-based offshore driller is preparing to start talks with creditors over a potential restructuring plan.

The company is considering filing for Chapter 11 bankruptcy amid a collapse of energy prices as supply exceeds demand.

Last month, the company hired restructuring advisers to help with its $6.5 billion debt load.

After the session ended on Monday, S&P issued an overall downgrade to the name, citing the drop in demand for oilfield services and weak offshore activity in the future.

“There is going to be a lot of this type of story in this sector for the next few months,” a trader said.

Transocean varies

Sector peer Transocean’s paper varied throughout the day, traders said.

The 6.5% senior notes due 2020 picked up 2¾ points to close at 77 bid. The 6.8% senior paper due 2038 dipped 2¼ points to close at 23¾ bid.

The Steinhausen, Switzerland-based offshore contract driller was another energy name to receive a ratings downgrade on Monday.

S&P slashed the company’s overall rating to CCC from CCC+ while also cutting issue-level ratings.

As energy futures continue to operate at historically low levels, the agency expects reduced revenue and cash flow estimates.

The outlook is negative.

Oil loses

More losses for oil futures extended the negative trend in distressed energy names, market sources said.

West Texas Intermediate crude oil futures for June delivery was knocked down $8.86 to settle at $11.57 per barrel.

North Sea Brent crude oil futures for June delivery finished at $19.33 per barrel after a $6.24 loss.

Houston-based independent oil and gas producer Occidental Petroleum’s notes trailed.

The 2.9% senior notes due 2024 dived 7¼ points to close at 65¾ bid. The 2.7% senior notes due 2022 were pushed down 2 points to close at 77 bid.

Denver-based producer Whiting Petroleum’s issues diverged in direction.

The 6¼% senior notes due 2023 shed 2¼ points to close at 5¾ bid. The 6 5/8% senior notes due 2026 inched up ¼ point to close at 6¼ bid.

PG&E up

Meanwhile, in utilities, PG&E’s paper was positive, traders said.

The 6.05% senior notes due 2034 gained 1¾ points to close at 110½ bid.

News broke on Tuesday that a California regulator has asked the San Francisco-based bankrupt electric utility to make governance and oversight changes in its reorganization plan.

At the same time, the California Public Utilities Commission wants to impose about $2 billion in penalties on the company for its role in 2017 and 2018 wildfires.

The company responded by saying it would comment on the proposed fine within 10 days and would remain on track for a June 30 bankruptcy exit as it evaluates the regulator’s suggestions.

Bombardier down

Manufacturer Bombardier’s notes were under pressure, market sources said.

The 7 7/8% senior notes due 2027 lost 2 points to close at 68 bid. The 6% senior notes due 2022 chalked off 1½ points to close at 77 bid.

Over the last week, the Montreal-based aerospace manufacturing name has put in motion plans to restart production at previously closed production facilities.

The company temporarily shuttered facilities last month in order to meet government mandates on business closures in Canada and the United Kingdom.

Part of the plan includes converting a Canadian plant to making ventilator components.

While some U.K. facilities have already reopened, Bombardier hopes to get the rest back online on May 4.

Frontier, Intelsat mixed

In the telecom space, Frontier’s issues saw mixed activity, traders said.

The 10½% senior notes due 2022 tacked on ¾ point to close at 32 bid. The 11% senior notes due 2025 held level at 32 bid.

Last week, with the majority support of its creditors, the Norwalk, Conn.-based wireline communications company filed for Chapter 11 bankruptcy.

As part of the restructuring agreement, $10 billion of its debt would be wiped out.

In March, the company generated bankruptcy talk after announcing that it would skip an interest payment and enter a 60-day forbearance period.

Luxembourg-based satellite name Intelsat’s paper also differed in direction.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 slipped 2½ points to close at 58½ bid. Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 gained ½ point to close at 14 bid.

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