L Brands notes fall on cut dividend; Sable Permian issues dive on earnings report

By James McCandless

San Antonio, Nov. 20 – Traders were surprised by the amount of volume early in the Thanksgiving holiday week, with mostly steady declines across the board.

L Brands, Inc.’s notes fell Tuesday after the company announced it would cut its shareholder dividend, even though the company beat earnings estimates.

Elsewhere in retail, PetSmart, Inc.’s issues also declined, while J.C. Penney Co., Inc. paper improved.

In the oil and gas space, Sable Permian Resources LLC’s notes saw steep drops after an extended period of no trading.

Meanwhile, other distressed oil names continued to get beaten up, namely California Resources Corp., EP Energy Corp. and Ensco plc’s issues.

Hospital operator Community Health Systems, Inc.’s paper was moving lower after the company announced the sale of four hospitals.

Chemicals producer Hexion, Inc.’s notes were caught up in the market’s negative trend.

Retail falls

L Brands’ notes saw a drop, traders said.

The 5¼% notes due 2028 lost 3¼ points to close at 85¼ bid. The 6¾% notes due 2036 fell 1 point to close at 82¾ bid.

On Tuesday, the Columbus, Ohio-based retailer released its third-quarter earnings report.

The company reported a 16 cents per share profit, beating analyst expectations of 15 cents per share.

While earnings were positive, the market focused on the company’s decision to cut its quarterly dividend to $1.40 from $2.40.

“People are seeing this as a kind of contraction,” a trader said. “Sales are falling. They have to figure out how to retool the Victoria’s Secret brand and make it more profitable.”

Elsewhere in the retail space, Phoenix-based pet supplies retailer PetSmart’s issues followed the negative trend.

The 8 7/8% notes due 2025 dropped 2 points to close at 65½ bid. The 5 7/8% notes due 2025 shaved off ½ point to close at 76¼ bid.

Plano, Texas-based department store chain J.C. Penney’s 8 5/8% paper due 2025 added ½ point to close at 59½ bid.

Oil and gas lower

Sable Permian Resources’ notes were under pressure, market sources said.

The 8% notes due 2020 tanked 8¾ points to close at 85¾ bid. The 7 1/8% notes due 2020 lost 3 points to close at 55½ bid.

The Houston-based independent oil and gas producer’s notes became active after a dearth of trading after reporting its third-quarter results.

Meanwhile, another decline in oil futures preempted a drop in distressed oil names.

Los Angeles-based sector peer California Resources’ issues led the sector lower.

The 6% notes due 2024 fell 3¾ points to close at 74 bid. The 8% notes due 2022 dipped 5 points to close at 80½ bid.

Houston-based producer EP Energy’s 6 3/8% paper due 2023 lost 1¾ points to close at 51½ bid.

London-based contract driller Ensco’s 7¾% notes due 2026 traded down 2 points to close at 83¼ bid. The 5.2% notes due 2025 dropped 2¾ points to close at 74 bid.

“I’m just surprised by the amount of volume we’re seeing right before a holiday,” a trader said. “The negativity isn’t as surprising, but energy is just getting destroyed right now.”

West Texas Intermediate crude oil futures dropped nearly $4 to close Tuesday at $53.43 per barrel. North Sea Brent crude dropped $4.63 to end at $62.31 per barrel.

Community Health flat

Community Health’s issues were active but ended flat, traders said.

The 6 7/8% notes due 2022, while falling as far as 46½ bid, ended the session level at 48½ bid, according to Trace data. The 6¼% notes due 2023 shaved off ¼ point to close at 91½ bid.

Late Monday, the Franklin, Tenn.-based hospital operator announced the sale of four of its properties in South Carolina to Medical University Hospital Authority.

The divestiture, part of the company’s debt reduction plan, is expected to close in the first quarter of 2019.

Hexion off

Hexion’s paper continued to trend downward, market sources said.

The 9% paper due 2020 dropped 3¾ points to close at 46½ bid. The 6 5/8% paper due 2020 lost 1¼ points to close at 82¾ bid.

Last week, the company released its third-quarter earnings report, showing $952 million in sales and a segment EBITDA of $128 million.

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