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Hertz wins approval to sell shares from bankruptcy judge

  
  Analysis
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What a sordid saga

What a sordid saga
This Hertz fiasco is one of the most-sordid, depressing stories in market history. The company shares are worthless or close to it.
Yet somehow Robinhood traders were duped into pumping it.
The bond holders need to be made 100% whole before equity gets a sense. To give you a sesne of where that stands, the 2022 bonds are trading at 42-cents and that’s about par for the course. There is a total of 5.5B in debt outstanding overall so at 42% recovery, that’s something like a 2.3B shortfall.
That all needs to be paid out by liquidating whatever assets are left.
Somehow the equity is trading at $2.83 and the bondholders got the idea to sell $1 billion in shares, which was approximately 247m shares at the levels where they petitioned the judge. That compares to 142m currently outstanding in the entire float.
The bondholders have been honest with the judge. They told him “the common stock could ultimately be worthless.”
But, hey, if we offer $1B in shares and someone wants to buy them, who is the judge to stop it? The judge just agreed in a decision shortly after the close.
Now I don’t think they’ll actually be able to float that much stock at reasonable levels but in this market, you never know. In any case, that money will go straight from the stock holders to the bond holders who no-doubt can’t believe their good fortune.
The NYSE is already in the process of delisting HTZ.
On the one hand, this is hilarious. On the other, it says so many bad things about market functioning, the intellect of market participants and the overall madness of crowds; that it’s frightening.

Beige Book: Economic activity declined in all districts – falling sharply in most

  
  Analysis
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Highlights of the Beige Book released May 27, 2020:

  • The next Fed decision is June 10
  • Wage pressure mixed
  • Pricing pressures varied but were steady to down modestly on balance
  • Date collected on or before May 18
  • In New York there were scattered signs of a pickup in early May
  • Full text

This doesn’t tell us anything we didn’t know.

The overall summary is about what you would expect:
Economic activity declined in all Districts – falling sharply in most – reflecting disruptions associated with the COVID-19 pandemic. Consumer spending fell further as mandated closures of retail establishments remained largely in place during most of the survey period. Declines were especially severe in the leisure and hospitality sector, with very little activity at travel and tourism businesses. Auto sales were substantially lower than a year ago, although several Districts noted recent improvement. A majority of Districts reported sharp drops in manufacturing activity, and production was notably weak in auto, aerospace, and energy-related plants. Residential home sales plunged due in part to fewer new listings and to restrictions on home showings in many areas. Construction activity also fell as new projects failed to materialize in many Districts. Commercial real estate contacts mentioned that a large number of retail tenants had deferred or missed rent payments. Bankers reported strong demand for PPP loans. Agricultural conditions worsened, with several Districts reporting reduced production capacity at meat-processing plants due to closures and social distancing measures. Energy activity plummeted as firms announced oil well closures, which led to historically low levels of active drilling rigs. Although many contacts expressed hope that overall activity would pick-up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery.

Saudi supports cooperation to stabilise oil market, blames Russia for current turmoil – Gulf source

  
Analysis, Crude
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Actions speak louder than words

Oil

According to Reuters – citing a senior Gulf source familiar with Saudi Arabia – the kingdom “has always welcomed cooperation among oil producers to stabilise the market, based on the principles of fairness and equity”.

Adding that producers were forced to end all voluntary supply restraint because of Russia’s rejection to deeper oil output cuts in the OPEC+ meeting last month.

“It was Russia’s position that triggered the collapse of the OPEC+ agreement.. this caused massive instability in oil markets”, said the source.

Well, actions speak louder than words. The fact that both sides continue to put on this show for the world, where they are still not talking, just means that no real cooperation is imminent and that continues to bode ill for oil prices so long as this continues.

Novak reappointed as Russia’s energy minister but all eyes on US production

  
  Analysis
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Kremlin statement

Actions speak louder than words so this is the best possible endorsement of Russia’s cooperation with OPEC.
Earlier today, OPEC’s secretary general confirmed there will be a meeting in March and said that Russia was expected to continue with OPEC.
In other oil news, Halliburton reported earnings today and along with Schumberger yesterday, they signaled that shale activity has already peaked. The oilfield services giants have keen insight into the industry and today Halilburton CEO Jeff Millers said that spending would keep falling in North America
“2019 solidified the pivot from growth to capital discipline in North America,” Miller said.
The outlook for US production depends on DUCs or drilled but uncompleted wells. In theory, these could allow companies to tap into oil without spending money but some market watchers are skeptical that the wells have any real value.
More on the outlook from Halliburton here via Bloomberg.

Boris Johnson spokesman: If EU offers Jan extension, there will need to be an election

  
Analysis, Politics
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Johnson spokesman:

  • Johnson spoke to Tusk and told him he still opposes an extension
  • No meeting of minds with Corbyn after meeting
  • Johnson wants to get his deal done by Oct 31 but yesterday’s vote makes no-deal more likely
  • If an extension is vetoed, we have a plan to get it done
  • Asked if he could hold an election before Christmas, spokesman says ‘yes’
The Irish PM said if there is no consensus on extension, EU leaders would need to meeting possibly on Monday, maybe even Friday.
A Labour spokesman said there is a strong likelihood the EU will grant an extension along the lines of what was requested.

IMF chief Lagarde the latest name thrown into the hat to succeed Draghi as ECB president

  
  Analysis
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The rumours are flying all over the place as the European Council summit start time gets delayed again

Lagarde

European leaders will now only begin their sit-down session at 1300 GMT after the start time has been delayed since the morning. Of course, all of this is happening as everyone is scrambling to negotiate with their respective parties and counter-parties in order to work out an agreement for who will take up Europe’s top jobs.

The latest update sees IMF chief, Christine Lagarde, emerging as a possible frontrunner to succeed Draghi as ECB president, according to Bloomberg. Frans Timmermans is said to remain as the main candidate to become European Commission president but is encountering opposition from several nations from Eastern Europe.
There’s also talk that we could see a split as per the following in order for all parties to try and reach some form of agreement, although I doubt most countries will be happy with Germany taking up the European Commission presidency and still having Manfred Weber chair parliament for 2.5 years:
EU leaders
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