Hertz term loan strengthens in trading with earnings news; Watlow reveals price talk

By Sara Rosenberg

New York, Oct. 27 – Hertz Global Holdings Inc.’s term loan gained some ground in the secondary market on Thursday after the company released third quarter results that were better than analyst estimates for earnings per share and showed a year-over-year improvement in revenues.

Meanwhile, in the primary market Watlow Electric Manufacturing Co. came out with price talk on its incremental term loan in connection with its lender call.

Hertz rises

Hertz’s term loan moved up on Thursday after the company disclosed third quarter earnings, with one source quoting the debt at 96 1/8 bid, 96 7/8 offered, versus 95 7/8 bid, 96 5/8 offered on Wednesday, and another source quoting it at 96 bid, 97 offered, up from 95¾ bid, 96¾ offered.

For the third quarter, Hertz reported GAAP net income of $577 million, or $1.33 per diluted share, compared to GAAP net income of $608 million, or $1.13 per diluted share, in the third quarter of 2021. Adjusted net income for the quarter was $410 million, or $1.08 per adjusted diluted share, versus $587 million, or $1.20 per adjusted diluted share in the comparable period last year.

By comparison, Zacks Consensus Estimate was for earnings of $1.04 per adjusted diluted share.

Total revenues for the quarter were $2.496 billion, up from $2.226 billion in the 2021 third quarter, and adjusted Corporate EBITDA was $618 million, versus $860 million in the prior year.

The company had operating cash flow of $932 million in the quarter, adjusted operating cash flow of $572 million, adjusted free cash flow of $505 million, and corporate liquidity of $2.6 billion at Sept. 30, including $1 billion in unrestricted cash. Hertz used $500 million to repurchase 27.2 million common shares during the quarter.

Hertz is an Estero, Fla.-based car rental company.

Loan indices mixed

In other news, IHS Markit’s iBoxx loan indices were mixed on Wednesday, with the Leveraged Loan indexes (MiLLi) closing out the day up 0.01% and the Liquid Leveraged Loan indices (LLLi) closing out the day down 0.01%.

Month to date, the MiLLi is up 0.63% and year to date its down 3.03%. The LLLi is up 0.92% month to date and down 3.92% year to date.

Average secondary market bids in the U.S. on Wednesday were 92.26, down 0.05% from the previous day and down 4.74% year to date.

According to the IHS Markit data, some of the top advancers on Wednesday Cineworld’s February 2018 U.S. covenant-lite term loan at 25.81, up from 23.82, Genesis Care’s March 2020 U.S. covenant-lite term loan B at 34.57, up from 32.67, and Envision Healthcare’s October 2018 covenant-lite unvoted term loan at 27.95, up from 27.13.

Some top decliners on Wednesday were Mitel Networks’ November 2018 term loan at 58, down from 60.46, Rackspace Hosting’s February 2021 covenant-lite term loan B at 63, down from 64.44 and Phoenix Services International’s January 2018 term loan at 20.23, down from 20.65.

Watlow guidance

Moving to the primary market, Watlow held its lender call on Thursday morning and announced talk on its $175 million incremental term loan (B) due March 2028 at SOFR+CSA plus 475 basis points to 500 bps with a 0.5% floor, an original issue discount of 93 to 94 and 101 soft call protection for six months, a market source remarked.

CSA is 11.448 bps one-month rate, 26.161 bps three-month rate and 42.826 bps six-month rate.

Commitments are due at noon ET on Nov. 4, the source added.

BMO Capital Markets and Citizens are leading the deal that will be used to help fund the acquisition of Eurotherm from Schneider Electric.

Watlow is a St. Louis-based designer and manufacturer of complete thermal systems. Eurotherm is a Worthing, U.K.-based provider of temperature, power, and process control, measurement and data management equipment, systems, software, and services for industrial markets.

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