Hertz eyed on going-concern news; Cleveland-Cliffs notes trade up after earnings beat

By James McCandless

San Antonio, May 12 – Distressed debt trading focused on names with going-concern issues and earnings on Tuesday.

Hertz Global Holdings, Inc.’s notes varied after the company warned that there is doubt of its continuing as a going concern.

Meanwhile, mining name Cleveland-Cliffs Inc.’s issues perked up a day after releasing its first-quarter earnings report.

In oil and gas, California Resources Corp.’s paper diverged as it experienced its own going-concern issues.

As oil futures saw a positive day, Occidental Petroleum Corp.’s, SM Energy Co.’s and Whiting Petroleum Corp.’s notes tracked higher.

Gaming name Scientific Games Corp.’s issues gained ground after releasing a lackluster earnings report for the first quarter.

Elsewhere, AMC Entertainment Holdings, Inc.’s paper gave back some of the gains spurred by takeover talk on Monday.

In the retail space, Revlon, Inc.’s notes improved by the end of the session.

Hertz varies

Hertz’s notes varied in direction as Tuesday came to a close, traders said.

The 6¼% senior notes due 2022 gained 1½ points to close at 19 bid. The 6% senior notes due 2028 lost 3 points to close at 12 bid.

As part of its first-quarter earnings release late Monday, the Estero, Fla.-based car rental company reported that there is substantial doubt that it will be able to remain a going concern within a year, warning that it may not have enough liquidity to pay its lenders.

In its earnings report, the company showed a loss of $1.78 per share, worse than the $1.06 loss expected by analysts.

Revenues also missed the mark at about $1.92 billion.

Concurrently, Hertz said that has cancelled 90% of its new car purchases for 2020 as travel has been significantly reduced by the coronavirus pandemic.

“Nobody’s moving right now,” a trader said. “They can’t move their inventory one way or another. They can’t buy and they can’t sell cars.”

The company is in a forbearance period with a May 22 deadline and is holding talks with creditors.

Cleveland-Cliffs up

Meanwhile, mining name Cleveland-Cliffs’ issues perked up, market sources said.

The 4 7/8% senior secured notes due 2024 rose 2¾ points to close at 89¼ bid. The 9 7/8% senior secured notes due 2025 tacked on ¼ point to close at 99¼ bid.

On Monday, the Cleveland-based iron ore mining company issued a better-than-expected first-quarter earnings report.

Earnings per share came in at a 4 cents per share profit, well above the 18 cents per share loss that analysts had predicted.

Revenues came in just below expectations at $359.1 million.

California Resources eyed

In oil and gas, California Resources’ paper diverged in direction, traders said.

The 6% senior paper due 2024 added 1¼ points to close at 4 bid. The 8% senior secured notes due 2022 dropped 2¼ points to close at 2 bid.

In a filing with the Securities and Exchange Commission, the Los Angeles-based independent oil and gas producer said it would delay submitting its first-quarter earnings report and withdrew its guidance for the rest of the year.

The company also said that there is doubt that it would be able to continue as a going concern if it could not restructure its balance sheet.

The outbreak of Covid-19 and government stay-at-home mandates has shrunk energy demand, leading to low commodities prices.

Oil positive

As oil futures saw a positive day, distressed energy names followed suit, market sources said.

Crude futures saw gains after Saudi Arabia floated increased supply cuts in June.

West Texas Intermediate crude oil futures for June delivery garnered $1.64 to settle at $25.78 per barrel.

North Sea Brent crude oil futures for July delivery finished at $29.98 per barrel after a 35 cent pickup.

Houston-based producer Occidental Petroleum’s notes moved up with futures.

The 2.9% senior notes due 2024 picked up ¼ point to close at 76½ bid. The 2.7% senior notes due 2022 shifted up 1½ points to close at 88 bid.

Denver-based peer SM Energy’s issues joined the trend.

The 6 1/8% senior notes due 2022 jumped up 4 points to close at 43½ bid. The 6¾% senior notes due 2026 gained 1 point to close at 28 bid.

Whiting Petroleum, another Denver-based producer, saw its paper gain.

The 6¼% senior paper due 2023 added 1¼ points to close at 7¾ bid. The 6 5/8% senior paper due 2026 rose ¾ point to close at 8¾ bid.

Scientific Games adds

Meanwhile, Scientific Games’ notes gained ground by the close, traders said.

The 5% senior secured notes due 2025 were lifted 2½ points to close at 90 bid. The 7% senior notes due 2028 shot up 3¾ points to close at 78½ bid.

Late Monday, the Las Vegas-based gaming and lottery name added its first-quarter earnings report to the pile.

The company reported a $1.69 per share loss, far worse than the 16 cents per share profit expected by analysts.

Revenues were also lagging at $725 million.

AMC lower

Elsewhere, AMC’s issues gave back some recent gains, market sources said.

The 5 7/8% senior subordinated notes due 2026 dipped 2¾ points to close at 26¼ bid. The 10½% notes due 2025 were docked 2 points to close at 83 bid.

On Monday, the notes picked up 7 and 5 points, respectively.

The Leawood, Kan.-based movie theater name’s structure backed off of recent spikes that were generated by Monday reports that the company was in takeover talks with Amazon.com Inc.

On Tuesday, headlines suggested that the company is interested in a buyout, but the two parties have yet to confirm or deny any links.

Revlon gains

In the retail space, Revlon’s paper improved by the end of the session, traders said.

The 6¾% senior notes due 2036 moved up 2¼ points to close at 67¾ bid. The 5¼% senior paper due 2028 rose 1 point to close at 66¼ bid.

By the end of Monday, the New York-based cosmetics name’s subsidiary, Revlon Consumer Products Corp., closed on its $880 million senior secured first-lien term loan due June 30, 2025.

Despite pockets of creditor opposition, the company spent the last few weeks completing a $1.8 billion debt refinancing package.

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