PetSmart in focus after note offering pulled; CBL trades mixed on bankruptcy filing

By James McCandless

San Antonio, Nov. 2 – Retail-focused names were at the forefront of the distressed debt market as a new week began.

PetSmart, Inc.’s notes diverged in direction after the company pulled a notes and term loan offering late last week.

Sector peer Nordstrom, Inc.’s issues declined.

Elsewhere, CBL & Associates Properties, Inc.’s paper varied after the company filed for Chapter 11 bankruptcy.

Property owner Washington Prime Group Inc.’s notes rose.

Automotive name Tenneco, Inc.’s issues gained ground after posting lukewarm earnings results for the third quarter.

Meanwhile, theater chain AMC Entertainment Holdings, Inc.’s paper yielded mixed results in anticipation of its earnings release.

In the oil and gas space, Pacific Drilling SA’s notes spiked after the company began voluntary Chapter 11 proceedings.

A positive day for oil futures translated to similar improvements for Occidental Petroleum Corp.’s and Antero Resources Corp.’s issues.

PetSmart notes mixed

PetSmart’s notes were seen diverging in direction on Monday, traders said.

The 8 7/8% senior notes due 2025 rose 1½ points to close at 101¼ bid. The 5 7/8% senior notes due 2025 dipped ½ point to close at 102 bid.

About $74 million of the two tranches combined were on the tape.

Toward the end of the Friday session, the Phoenix-based pet supplies chain and PetSmart Finance Corp. pulled their $2.65 billion megadeal from the market amid investor push-back and market volatility, Prospect News reported.

The company had planned to price an upsized $1.5 billion, from $1.2 billion, tranche of seven-year senior secured notes and a $1.15 billion tranche of eight-year unsecured notes on Friday.

Concurrently, the company scrapped its plan for a $2 billion six-year term loan B.

Funds from the offers were slated to finance PetSmart’s split from its e-commerce counterpart, Chewy, Inc.

“A lot of the bondholders are resistant to the split, because Chewy is so profitable,” a trader said. “I’m not sure the split is something that can be accomplished by the end of the year.”

The move comes after a week of wrangling between private equity firm BC Partners and investors over loose covenants.

Seattle-based sector peer Nordstrom’s issues declined.

The 5% senior notes due 2044 shaved off ¼ point to close at 70½ bid.

CBL notes eyed

Elsewhere, mall name CBL’s paper varied throughout the session, market sources said.

The 5¼% senior notes due 2023 held level to close at 36¾ bid. The 4.6% senior notes due 2024 lost 1¼ points to close at 35½ bid.

On Monday morning, the Chattanooga, Tenn.-based mall-focused real estate investment trust announced that it filed voluntary petitions for reorganization under Chapter 11 in bankruptcy court.

The company will implement a plan to recapitalize the company, including restructuring portions of its debt.

According to the plan, CBL intends to execute a debt swap that would see unsecured noteholders receive 90% of new equity in exchange for about $1.4 billion in debt.

CBL’s structure has seen increased negative pressure since the onset of the coronavirus pandemic, when government mandates led to the closure of non-essential businesses.

Columbus, Ohio-based property owner Washington Prime’s notes rose.

The 6.45% senior notes due 2024 shifted up ¼ point to close at 52 bid.

Tenneco gains

Automotive name Tenneco’s issues gained ground, traders said.

The 5% senior notes due 2026 shot up 2½ points to close at 81½ bid.

Early on Monday, the Lake Forest, Ill.-based auto parts manufacturer released lukewarm results for the third quarter.

The company reported earnings per share of 33 cents, falling short of analyst predictions for a 43 cents per share profit.

Revenues were pegged at $4.26 billion, beating analyst expectations.

As the pandemic continues, the Tenneco expects light growth for the fourth quarter as conditions in the auto industry remain filled with uncertainty.

AMC mixed

Meanwhile, theater chain AMC’s paper yielded mixed results, market sources said.

The 10½% notes due 2026 gained 2¼ points to close at 54 bid. The 12% paper due 2026 was pushed down ¾ point to close at 5 bid.

As the market opened up this week, the Leawood, Kan.-based movie theater operator filed a plan with the Securities and Exchange Commission to sell 20 million shares of its common stock over time.

The plan is supposed to raise about $50 million.

“I think there is a better chance than ever for a reorganization within the next six months,” a trader said.

After the close on Monday, the company reported a $5.70 per share loss versus the $4.95 per share loss that analysts had expected.

Revenues came in at about $119 million.

Pacific Drilling better

In the oil and gas space, Pacific Drilling’s notes spiked, traders said.

The 8 3/8% senior notes due 2023 added 2¼ points to close at 14¼ bid. The 12% notes due 2024 rose 2¼ points to close at 2¼ bid.

Late Friday, the Houston-based offshore drilling contractor started voluntary Chapter 11 proceedings in bankruptcy court, Prospect News reported.

The company has entered into a restructuring support agreement with a group of the largest holders of its outstanding bonds.

The financial restructuring plan will eliminate the company’s $1.1 billion in outstanding bonds through the cancellation and exchange of debt for new equity in the reorganized company.

At the end of the year, Pacific Drilling expects to emerge from the process with access to new capital in the form of an $80 million exit facility and with approximately $110 million of cash and cash equivalents.

Pacific Drilling had previously filed Chapter 11 on Nov. 12, 2017 and emerged on Nov. 19, 2018.

Oil names positive

A positive day for oil futures translated to similar improvements for distressed energy names, market sources said.

West Texas Intermediate crude oil futures for January delivery jumped up $1.03 to settle at $37.18 per barrel.

North Sea Brent crude oil futures for January delivery finished the session at $38.97 per barrel after a $1.03 pickup.

Houston-based independent oil and gas producer Occidental Petroleum’s issues were positive.

The 2.9% senior notes due 2024 gathered 1¾ points to close at 85 bid. The 2.7% senior notes due 2022 moved up ½ point to close at 93 bid.

Denver-based producer Antero Resources’ paper followed the sector trend.

The 5 5/8% senior notes due 2023 shot up 2¾ points to close at 87½ bid. The 5% senior paper due 2025 improved by 1¼ points to close at 76½ bid.

© 2015 Prospect News.
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