Hertz bonds nearly erase Friday’s gains on new equity raise; Cineplex stock crumbles on merger failure – Mid-Day Commentary

Hertz’s bonds and equity erased some of Friday’s gains this morning after the bankrupt car rental company filed to sell a smaller-than-expected USD 500m in new equity, according to two buysiders and one sellsider. The bonds initially bounced on Friday after the company announced it would seek – and did ultimately receive – court approval to issue up to USD 1bn in equity.

In its disclosures to potential new equity investors today, the company warned that those investors may receive nothing from an eventual bankruptcy plan after bondholders and other debtholders are paid.

“There is a significant risk that the holders of our common stock will receive no recovery under the Chapter 11 Cases and that our common stock will be worthless,” the filing states. 

Hertz’s USD 900m 6% senior unsecured notes due 2028 last traded today at 42.75 from trades at 48.5 late Friday (12 June), according to MarketAxess. The same notes traded at 40.5 early Friday.

Its Libor+ 275bps TLB due 2023 is quoted in the 87.179/89.598 context today, compared to the 88.036/90.607 context on Friday, according to Markit. 

The company’s stock traded today at USD 2.29 per share for a market cap of USD 326.452m, down 19.24% from Friday’s close. 

The acrimonious unravelling of Cineworld’s acquisition of Cineplex has left investors in both capital structures facing near-term uncertainty. Both movie theater operators have accused the other of not meeting contractual obligations necessary to close the deal, and Cineplex said on Friday (12 June) that it will pursue legal action against Cineworld. 

UK-based Cineworld in February syndicated a USD 1.9bn L+ 300bps (0% floor) term loan B due 2027 to help fund the USD 2.1bn purchase price of Cineplex, a Canadian operator. However, the company never drew on the escrow to purchase Cineplex, said a loan trader. 

The February loan was quoted this morning at 67/71, said the trader. Meanwhile, Cineworld’s legacy USD 3.3bn L+ 250bp term loan B due 2025 softened on the news, to 76/79 today from 78/81 on Friday, said the trader. 

Cineworld’s stock traded up 3% today to GBP 78.94 with a GBP 1bn market cap. The stock began the year at GP 220.00 per share. 

Meanwhile, Cineplex stock dropped 16% today to CAD 11.50 and a CAD 727m market cap, from CAD 13.79 per share at market close on Friday.

Cineworld’s attempt to back out of the merger was foreshadowed earlier this spring when a group of Cineworld lenders retained Houlihan Lokey and Arnold & Porter Kaye Scholer to help analyze the transaction and a means to exit the deal because of a dramatic change in the operating environment for movie theaters. Cineplex disagrees with Cineworld’s repudiation and noted that the agreement between the two companies excludes termination events including “outbreaks of illness or other acts of God.”

Meanwhile, in bankruptcy news, Skillsoft and 24 Hour Fitness loans softened as they filed for Chapter 11 protection this morning.  

Skillsoft filed for Chapter 11 with a restructuring support agreement backed by a majority of its first and second lien lenders following a missed interest payment last month. The RSA outlines a plan to reduce the company’s debt to USD 410m from roughly USD 2bn. 

The educational technology company’s USD 1.23bn L+ 475bps (1% floor) first lien term loan due 2021 softened to the 59.036/62.893 context this morning compared to the 60.839/65.339 context on Friday (12 June), according to Markit. 

24 Hour Fitness filed for bankruptcy with plans to secure a USD 250m DIP, citing the pandemic for its balance sheet problems. The company retained Lazard, FTI and Weil Gotshal as its advisors earlier this year for a restructuring. 

The gym operator’s USD 850m L+ 350bps term loan due 2025 is quoted at 26.35/30.825 versus 27.797/32.063 on 12 June, according to Markit.

Extraction Oil & Gas also filed for bankruptcy this morning after retaining restructuring advisors earlier this year. Though its debt did not trade on the news, the issuer’s stock is down to 54 cents this morning and a market cap of USD 75.4m, down 15% from Friday’s market close. The debtor has secured USD 125m in DIP financing consisting of USD 50m in new money.

In capital raising news, United Airlines’ bonds strengthened slightly while its equity softened after the airline announced it has received loan commitments of up to USD 5bn, backed by the company’s MileagePlus loyalty program, according to two buysiders and a sellsider. 

To counteract the company’s expected cash burn, United plans to have USD 17bn in liquidity at the end of 3Q20, including proceeds from the new term loan, an undrawn USD 2bn revolver and USD 4.5bn available under the federal CARES Act loan program. 

While both loans will provide the company with much-needed liquidity, layering is still a concern for existing lenders and bondholders, two of the sources said.

United’s USD 400m 4.25% senior unsecured notes due 2022 last traded today at 86.5 to yield 11.082%, compared to trades at 86.375 to yield 11.143% on Friday, according to MarketAxess. Its USD 300m 5% senior unsecured notes due 2024 gained a point to trade at 83.5 yielding 10.6% from 82.5 yielding 10.98% on Friday.

Its USD 1.485bn L+ 175bps TLB due 2024 is quoted today in the 90.95/93.35 context compared to 91.438/93.813 on Friday, according to Markit. 

The company’s stock traded today at USD 37.26 per share for a market cap of USD 10.967bn, down 6.05% from Friday’s close.

2020 Debtwire

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