Hertz notes drop after company nixes share offering; U.S. Steel better on stock sale

By James McCandless

San Antonio, June 18 – The distressed market fixated Thursday on names attempting to raise new capital to weather the pandemic and bankruptcy.

Hertz Global Holdings, Inc.’s notes lost ground after the company announced it would be canceling its common stock sale following regulatory scrutiny.

Meanwhile, United States Steel Corp.’s issues moved to better levels after the company sold $429 million in additional common stock.

Related name Cleveland-Cliffs Inc.’s paper was under pressure as the company received a ratings downgrade.

In the retail space, L Brands, Inc.’s notes shifted lower in the run-up to pricing two tranches of senior notes.

Pet supplies chain PetSmart, Inc.’s issues followed a downward trend.

Despite an uptick in oil futures, Occidental Petroleum Corp.’s, Whiting Petroleum Corp.’s and SM Energy Co.’s paper dipped.

Satellite operator Intelsat SA’s notes varied in direction in the wake of its DIP loan receiving final court approval.

Hertz notes decline

Hertz’s notes were losing ground throughout the Thursday session, traders said.

The 6¼% senior notes due 2022 fell 6 points to close at 30½ bid. The 5½% senior notes due 2024 dropped 7 points to close at 31 bid.

In a Thursday filing with the Securities and Exchange Commission, the Estero, Fla.-based car rental company’s board said that it would be suspending a $500 million offering of additional common stock.

After the regulator said on Wednesday that it had “comments” on the offering, the name originally said that it would put a hold on the offering in order to clear up any concerns.

Reports indicated that Hertz would work toward a $1 billion bankruptcy loan instead of common stock.

“Not only did they say that the stock would probably be worthless, they said that there was little chance that all the creditors would be paid back,” a trader said. “This whole debacle has made them look terrible.”

U.S. Steel better

Meanwhile, manufacturer U.S. Steel’s issues moved to better levels, market sources said.

The 6 7/8% senior notes due 2025 rose 1½ points to close at 77 bid. The 6¼% senior notes due 2026 grabbed 1¼ points to close at 74½ bid.

Late Thursday, the Pittsburgh-based steelmaker announced that it had sold an additional 50 million shares of common stock, netting about $429 million.

The company’s structure saw increased pressure on Wednesday after issuing a worse-than-expected forecast for Q2.

U.S. Steel expects a loss per share of $3.06, wider than analyst predictions of a $1.73 per share loss.

Increasing weakness has been attributed to lower demand amid the coronavirus pandemic.

Cleveland-Cliffs down

Related name Cleveland-Cliffs’ paper was under pressure, traders said.

The 5¾% senior notes due 2025 shaved off ¼ point to close at 89 bid.

During the Thursday session, the Cleveland-based iron ore miner received a ratings downgrade from S&P Global Ratings.

The agency lowered the company’s 7½% senior notes due 2023 to CCC from B- and revised the recovery rating to 6 from 4.

Also this week, Cleveland-Cliffs priced a $120 million add-on to its 6¾% senior secured notes due March 15, 2026 at 99.25, resulting in a 6.907% yield to maturity, Prospect News reported.

L Brands, PetSmart lower

In the retail space, L Brands’ notes shifted lower, market sources said.

The 6¾% senior notes due 2036 shed 1¼ points to close at 85½ bid. The 5¼% senior notes due 2028 chalked off ¼ point to close at 82¾ bid.

The Columbus, Ohio-based retailer’s structure was active in the run-up to the company’s announcement after the Thursday close that it sold $750 million of 6 7/8% senior secured notes due 2025 and $500 million 9 3/8% senior notes due 2025 in a private placement offering.

The company plans to use some of the proceeds to redeem its outstanding 2021 notes.

Last month, L Brands said that it would shutter 250 of its Victoria’s Secret stores.

Phoenix-based pet supplies chain PetSmart’s issues also followed a downward trend.

The 8 7/8% senior notes due 2025 gave back ¾ point to close at 102¾ bid. The 5 7//8% senior notes due 2025 lost ¾ point to close at 101¾ bid.

Oil names slip

Elsewhere, despite an uptick in oil futures, distressed energy tranches slipped, traders said.

West Texas Intermediate crude oil futures for July delivery gained 88 cents to close at $38.84 per barrel.

North Sea Brent crude oil futures for August delivery ended at $41.51 per barrel after an 80 cent jump.

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

The 2.9% senior paper due 2024 moved down 1 point to close at 88 bid. The 2.7% senior notes due 2022 were docked ¼ point to close at 93¼ bid.

Denver-based producer Whiting Petroleum’s notes followed the trend.

The 6¼% senior notes due 2023 shed ¼ point to close at 15½ bid. The 6 5/8% senior notes due 2026 declined by ½ point to close at 15½ bid.

SM Energy, another Houston-based producer, also saw weakness in its issues.

The 6¾% senior notes due 2026 fell 3 points to close at 48½ bid.

Intelsat varies

Telecom name Intelsat’s paper varied in direction by day’s end, market sources said.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 moved down ¼ point to close at 59½ bid. The 8% paper due 2024 improved by ½ point to close at 101¾ bid.

This week, the Luxembourg-based satellite operator received final approval to obtain $1 billion in debtor-in-possession financing in bankruptcy court.

The approved amount includes an initial draw of $500 million.

The company plans to apply the proceeds to the accelerated clearing of C-band spectrum in anticipation of a spectrum auction planned by the Federal Communications Commission for December.

Pre-bankruptcy secured debt holders will have access to up to 80.58% of the DIP financing commitments.

© 2015 Prospect News.
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