Halister News

(Bloomberg) -- Liens covenant tied to Hertz Global Holdings $1.25b sale of 7.625% secured junk-bond notes due 2022 “provides ample opportunities for manipulation,” Ross Hallock, an analyst at independent credit research firm Covenant Review, said in a report late Thursday.

• 4x consolidated secured leverage ratio shouldn’t be interpreted as a cap on the amount of parity lien secured debt, Hallock says; debt can be secured up to that ratio, and then additional parity liens can be secured under other carve-outs using tack-on notes
  • That would dilute a bondholder’s collateral position by reducing the value of the lien, Hallock said in a phone interview Friday
  • Carve-outs include $200m of parity lien debt under the general liens basket, $2.4b cap under credit facilities liens basket
  • Language doesn’t necessarily mean that $2.4b carve-out can’t be used for any incremental secured debt in excess of the 4x threshold
• Restricted payments covenant contains “fundamental flaw” for secured offering by not restricting prepayment of senior unsecured debt
• Hertz could sell all of its assets to a public co. without triggering a change of control
• Co. representatives didn’t immediately respond to request for comment
• Related story: Hertz’s New Debt Could Allow Asset Sales to Reward Shareholders

To contact the reporter on this story: Molly Smith in New York at msmith604@bloomberg.net To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Rick Green

(Bloomberg) -- Colombia’s outlook is more uncertain as declining oil prices deteriorate the trade balance and increase the chances of a steepening credit curve, Bank of America’s strategists Jane Brauer and Herve Belmas write in a note to clients.

• Strategists see value in selling 2041 notes vs. 2026 ones on the long end of the curve
• Increased local issuance resulting from wider fiscal deficits and potentially steeper U.S. curve also support the call
• BofA also recommends selling Brazil’s 2041 notes vs. 2026 as political noise is unlikely to disappear in the next few months, keeping the reform agenda at risk and steepening the curve

To contact the reporter on this story: Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net Peter Millard

(Bloomberg) -- EGB supply is set to turn light again next week, with double auction from Italy and Schatz sale equivalent to an estimated 40k bund futures in duration terms.

• Key data release for the week is preliminary euro-zone inflation report, with Italy, Germany, Spain and France due for release ahead of euro-area headline print on June 30
• In addition to auction supply, markets are still expecting a new 10y Spain syndicated sale in the near future; all recent Spanish 10y sales were announced Monday for Tuesday syndication
• Expect month-end duration extensions to come into focus next week as flows begin to emerge. Bloomberg Barclays forecast Euro Aggregate to extend by 0.08y, breakdown here; Citigroup also sees 0.08y for EGB index, with Italy (+0.14y) expected to benefit the most, country breakdown here
• SUPPLY/REDEMPTIONS: Auction supply may total EU12.25b, equivalent to around EU6m/bp or 40k bund futures in risk terms
  • June 27: Italy to sell I/L 0.1% 05/2022 for EU0.5-1b and 3.10% 09/2026 for EU0.5-1b
  • June 27: Germany to sell 0% 06/2019 for EU4b
  • June 30: Italy to sell bonds; expectations are for 5y and 10y BTP for EU5.25b, alongside EU2b in 7y CCTeu
  • There are EU9.4b in redemptions due from Belgium, which can be reinvested from Monday, given T+2 settlement
• U.K. to sell 0.125% I/L 03/2026 for GBP1b on June 27; there are no gilt cash flows eligible for re-investment
  • NOTE: Auction calendar is ECO20 WE

To contact the reporter on this story: Stephen Spratt in London at sspratt3@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma