tyb
o7
Hertz Bonds Seen Valued at 25 Cents on the Dollar in CDS Auction
some background on Credit Default Swaps (CDS) at the bottom
Hertz Global Holdings Inc.’s bonds were valued at 25.375 cents on the dollar in the initial round of a credit derivatives auction Wednesday, casting doubt on the possibility that shares will have any value when the company emerges from bankruptcy The price, determined in an auction that’s used to settle hundreds of millions of credit default swaps tied to the bankrupt company, means traders who bought protection against the car rental company’s failure would be paid 74.625 cents for every dollar insured. A second round of the auction, which determines the final payout level, will be held Wednesday afternoon.
Traders had wagered a net $419 million of CDS on Hertz as of May 22, according to the International Swaps & Derivatives Association. The relatively low bond recovery level suggests Hertz shareholders are likely to see their holdings go to zero as the company reorganizes in bankruptcy court. Hertz is among several bankrupt and near-bankrupt companies whose shares have surged amid a burst of interest from retail investors, even though equity is typically wiped out in Chapter 11 proceedings. In a highly unusual move, Hertz attempted to sell new shares last week to raise cash and help pay off creditors before calling off the effort amid scrutiny from the Securities and Exchange Commission
In other words Hertz tried to float new equity prior to this auction taking place.
Hertz shares rose more than 50% Wednesday after analysts at Jefferies wrote that firms like CarMax Inc. and AutoNation Inc. could be interested in purchasing Hertz’s roughly 150,000-car inventory.
https://www.bnnbloomberg.ca/hertz-bonds-seen-valued-at-25-cents-on-the-dollar-in-cds-auction-1.1455714
if you know nothing about credit default swaps the reader's digest version is it is basically taking out insurance on your neighbor's house and then you setting fire to it because you now have ZERO risk.
See Blythe Masters at JP Morgan on Credit Default Swaps. Cap#2 explains relationship between DTCC and CDS via Chainlink-sorry hard to read..blew it up as much as possible
The woman who built financial 'weapon of mass destruction'
excerpt
In 1997, she and a team developed many of the credit derivatives that were intended to remove risk from companies' balance sheets. The idea was to separate the default risk on loans from the loans themselves. The risk would be moved into an off-balance sheet vehicle. The product was called Bistro, otherwise known as broad index secured trust offering.
https://www.theguardian.com/business/2008/sep/20/wallstreet.banking
What is a Credit Default Swap (CDS)?
https://corporatefinanceinstitute.com/resources/knowledge/finance/credit-default-swap-cds/
see you next bred faggit