Rite Aid declines as sector peer disappoints; Altice gains after asset sale closes

By James McCandless

San Antonio, April 2 – The distressed debt space saw a refocus on retailers and telecom names in Tuesday’s activity.

Rite Aid Corp.’s notes were in decline as the company faces a whistleblower lawsuit and industry pressures after a competitor reported disappointing earnings.

Elsewhere in retail, PetSmart Inc.’s issues moved higher as the company continues negotiations with creditors over a potential loan amendment.

Meanwhile, in telecom, Altice SA’s paper gained after it finalized the sale of its stake in a French fiber optics business.

Sector peer Frontier Communications Corp.’s notes closed the session mixed.

In utilities, PG&E Corp.’s issues fell as new probation terms are imposed on the company in the hopes of reducing future wildfire risk.

Chemicals name Hexion Inc.’s paper dropped a day after the company filed for Chapter 11 bankruptcy.

Energy name California Resources Corp.’s notes followed oil futures upward while Weatherford International plc’s issues ended mixed and Alta Mesa Resources, Inc.’s paper went negative.

Rite Aid declines

Rite Aid’s notes were in decline amid negative headlines, traders said.

The 6 1/8% notes due 2023 shaved off ¼ point to close at 83¼ bid. The 7.7% notes due 2027 lost 2½ points to close at 59 bid.

On Tuesday, the Camp Hill, Penn.-based drugstore chain was hit with fears of weakness in the retail pharmacy space after competitor Walgreens posted disappointing earnings and lowered its forward guidance.

Walgreens pointed to tightening market conditions that affected its ability to produce profits.

“That’s got everyone worried about Rite Aid and all the rest,” a trader said. “It’s a pretty tough spot for them to be especially since they’ve had a few stumbles in the last year.”

Last month, the company parted ways with its chief executive officer, other leadership and eliminated 400 other jobs.

In August 2018, a proposed merger with grocery chain Albertsons was cancelled ahead of a shareholder vote.

Also on Tuesday, the company was named in a whistleblower lawsuit.

The suit alleges that it overbilled government healthcare programs for prescription drugs in violation of the False Claims Act.

PetSmart higher

Elsewhere in the retail space, PetSmart’s issues were moving higher, market sources said.

The 8 7/8% notes due 2025 added 2¾ points to close at 77½ bid. The 5 7/8% notes due 2025 rose 1¼ points to close at 85¼ bid.

The Phoenix-based pet supplies retailer is in negotiations with creditors over a proposed loan amendment.

The most recent terms submitted by the company would give senior lenders a reimbursement if a portion of e-commerce segment Chewy.com were monetized.

The website has been the center of contention between the two parties since the company moved a significant stake of the name into private equity hands.

“They’re also trying to sweeten the deal with what comes from asset sales,” a trader said. “If they reach an agreement soon, you would probably see a significant portion of any sales proceeds go to repaying lenders.”

A main tenant of the loan amendment submitted recently stipulated that the company would limit the amount of new debt it could assume in exchange for the end of creditor’s litigation against it.

Altice up, Frontier mixed

Meanwhile, in telecom, Altice’s paper saw a gain, traders said.

The 7 5/8% paper due 2025 gained ½ point to close at 88¾ bid.

On Thursday, the Amsterdam-based telecom name closed the sale of its 49.99% stake in SFR FTTH, a French home fiber optics business.

The sale was originally announced in November for $2.05 billion.

On the domestic side, the Norwalk, Conn.-based wireline telecom name’s notes finished mixed.

The 11% notes due 2025 tacked on ¾ point to close at 67 bid. The 10½% notes due 2022, while moving as high as 77½ bid during the day, closed level at 76¾ bid.

PG&E falls

In utilities, PG&E’s issues were falling, market sources said.

The 3.95% notes due 2047 dropped ¼ point to close at 80¼ bid. The 4% notes due 2046 shed ¾ point to close at 80 bid.

The San Francisco-based bankrupt electric utility received new probation terms from a U.S. District Court judge on Tuesday meant to prioritize wildfire prevention.

The judge restricted the company from issuing dividends, ordering the funds be used for fire prevention efforts.

The company filed for bankruptcy earlier this year after incurring outsized liability charges stemming from 2017 and 2018 wildfires in California.

Hexion drops

Hexion’s paper saw a drop on Tuesday, traders said.

The 6 5/8% paper due 2020 declined by 1¼ points to close at 84¼ bid. The 10% paper due 2020 lost 1½ points to close at 85½ bid.

On Monday, the Columbus, Ohio-based chemicals producer filed for Chapter 11 bankruptcy with a restructuring plan.

Central points in the plan call for a $1.45 billion cash payout to first-lien holders, writing off $2 billion in debt and a rights offering for $300 million in equity capital.

Oil names mixed

Despite another rise for oil futures, distressed energy tranches varied in direction, a market source said.

Los Angeles-based independent oil and gas producer California Resources’ notes pushed higher.

The 6% notes due 2024 jumped up 3 points to close at 71 bid. The 8% notes due 2022 rose ¾ point to close at 82 bid.

Baar, Switzerland-based oilfield-service provider Weatherford’s issues were mixed.

The 8¼% notes due 2023 lost 1¼ points to close at 70¼ bid. The 9 7/8% notes due 2024 added 1½ points to close at 74¼ points.

Houston-based producer Alta Mesa’s paper declined.

The 7 7/8% paper due 2024 fell 2¼ points to close at 36½ bid.

West Texas Intermediate crude oil futures for May delivery finished 99 cents higher on Tuesday, finishing at $62.58 per barrel. North Sea Brent crude oil futures for June delivery closed at $69.37 per barrel after a 36-cent rise.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.