Murray Energy fall continues; Fresh Market, other grocers down; battered land-line names better

By Paul Deckelman

New York, Aug. 24 – The distressed-debt market was largely quiet on Thursday, in line with a generally lackluster overall high-yield bond market.

However, among the names which were seen trading around, Murray Energy Corp.’s bonds – which plunged around 7 points in heavy trading on Wednesday on the news that a federal emergency declaration the beleaguered coal producer was seeking on behalf of one of its major customers might not be forthcoming – continued to retreat on Thursday but on considerably reduced volume.

Supermarket operators – notably Fresh Market, Inc., but also including sector peers such as Albertsons Cos. LLC and SuperValu Inc. – were all seen lower – as retailing giant Amazon.com announced that it plans to cut prices on a wide range of products at Fresh Market rival Whole Foods Market Inc. once it completes its acquisition of the upscale grocery store chain, raising the specter of a destructive price war in what it is already a difficult low-margin business.

PetSmart, Inc.’s bonds, which have recently been under pressure on news that the specialty retailer’s chief executive officer will be leaving the company, were mixed on the session in active trading.

On the upside, traders saw strength in some recently challenged names in the telecommunications sector such as landline operators Frontier Communications Corp. and Windstream Holdings, Inc., although they did not see any fresh news that might explain those gyrations.

Algeco Scotsman Global Finance plc’s bonds, which had been pushed lower over the past two sessions despite the news of a pending asset sale and debt repayment by the modular storage products manufacturer, bounced a little in active trading on Thursday.

Back on the downside, California Resources Corp.’s paper slipped lower as world crude oil prices lost ground.

Murray Energy plunge slows

A trader said that Murray Energy’s 11% senior secured second-lien notes due 2021 were down another ¾ point on the day to 60¼ – “but on only a handful of trades.

“So it was not quite the hemorrhaging we had seen from yesterday [Wednesday].”

The smaller decline followed a lender presentation by the company that was thought to have gone fairly well and which may have steadied the bonds.

On Wednesday, the St. Clairsville, Ohio-based coal producer’s notes had gotten pounded down by 6 or 7 points on the day, ending at 61 bid after having dropped as low as 60 during the day, well down from prior levels in the upper 60s.

More than $32 million of those bonds changed hands on Monday, topping the Most Actives list for the day.

That plunge came amid reports that the Energy Department had denied a request from company chief executive officer Robert Murray to keep coal power plants running even in the case of bankruptcy. In his request, Murray said that closing FirstEnergy Solutions’ coal plants early – due to federal environmental rules – would cost 6,500 jobs and “would be a disaster for president Trump and for our coal mining communities.”

FirstEnergy Solutions – reportedly on the brink of bankruptcy – is a key customer of Murray Energy, thus the push for the two-year moratorium on closing coal-based power plants.

The Energy Department has the authority to enact emergency measures in regard to the operation of power plants. Usually, however, that is reserved for natural disasters, war or other scenarios where federal intervention is necessary.

Grocers go lower

Elsewhere, the news that online retailing giant Amazon plans to use its marketing muscle to cut prices on a wide variety of products available at upscale supermarket chain Whole Foods once it completes its acquisition of the latter company caused dismay among the bondholders of some of Whole Foods’ industry rivals, notably Fresh Market.

A trader noted that “TFM bonds were lower. I couldn’t figure it out – then I remembered the Amazon news – they’re going to cut all the prices for Whole Foods once that deal goes through, so that sector was lower.”

He saw St. Louis-based specialty supermarket operator Fresh Market’s 9¾% notes due 2023 “not terribly active – but the bonds were down 2½ points to 78 ½.

He noted that the issue had been trading around 81 or so when the market opened, then dropped as low as 77½ before coming back by 1 point from those lows, but still ending off on the day.

Among other supermarket names, he saw Albertsons’ 7¾% notes due 2026 at 92½, unchanged, while the Boise, Idaho–based grocery giant’s 6 5/8 notes due 2024 traded at 96, down 1 point.

But its 5¾% notes due 2025 “traded down just ¼” to 92½.

Both issues of Eden Prairie, Minn.-based food store operator SuperValu were meanwhile lower, with its 7¾% notes due 2022 down 2¼ points to 96¾ and its 6¾% notes due 2021 down 1 point at 98¾ bid.

PetSmart paper steadies

Also in the retailing space – though in this case more a supermarket for pet foods and other good things for dogs, cats, fish, birds, rabbits and hamsters – PetSmart Inc. bonds were actively traded on Thursday at mixed levels.

“PetSmart is always active,” a trader said, seeing the Phoenix-based company’s 5 7/8% notes due 2025 down about ¼ point at 89¾, as over $18 million traded.

He saw its 8 7/8% notes due 2025 up ¼ point to 84 bid while its 7 1/8% notes due 2023 were unchanged at 83 1/8, both on volume of around $13 million.

Pet Smart’s paper has gyrated around at mostly lower levels ever since the company’s Aug. 10 announcement that Michael J. Massey was stepping down from his post as chief executive officer.

Telecom trades better

Landline telecom names have recently been under pressure, but they seemed to have caught a bid on Thursday in active dealings.

A trader saw Windstream Holdings’ 7¾% notes due 2021 up a deuce on the day at 76½ bid, on turnover of more than $15 million.

The Little Rock, Ark.-based company’s 7¾% notes due 2020 gained 5/8 point on the day to end at 87¾ bid, on more than $11 million traded.

Stamford, Conn.-based sector peer Frontier Communications’ 11% notes due 2025 shot up by 1 7/8 points to 85 5/8 bid, with over $18 million traded.

Its 10½% notes due 2022 were 2 point gainers on the day at 88¾ bid, as over $12 million were traded.

Frontier’s 9¼% notes due 2021 did almost as well, up 1½ points on the day to end at 90½ bid, with over $8 million traded.

Algeco shows improvement

Algeco Scotsman’s 8½% notes due 2028 were also in comeback mode on Thursday, gaining 3/8 point to finish at 94½ bid, on volume of more than $13 million.

That upside movement stood in contrast to the action on Tuesday, when the bonds lost ½ point as more than $29 million traded, topping the Most Active List, and on Wednesday, when they plunged by 1 3/8 additional points down to 94 1/8 bid, although volume shrank to only around $3 million.

The bonds have gyrated ever since Tuesday’s announcement that the Baltimore-based maker of modular storage units will sell its Williams Scotsman unit for $1.1 billion, using some of the proceeds to repay debt and the rest for an acquisition.

The buyer is Los Angeles-based Double Eagle Acquisition Corp., which has lined up a $600 million senior secured revolving credit facility and $300 million of bridge financing for the deal.

Oil slides

A trader said that “oil was down a little bit – so Cal Res [California Resources’ 8% notes due 2022] traded down 1 point at 52 3/8, a recent low, I think.”

October-delivery West Texas Intermediate slid by 98 cents on the Nymex on Thursday, settling at $47.43 a barrel.

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