Rite Aid struck on Amazon challenge; Intelsat falls on earnings, Bombardier recovers a little

By Paul Deckelman

New York, Oct. 26 – Rite Aid Corp. notes dropped by multiple points in trading Thursday amid news reports that internet retailing giant Amazon.com had received pharmaceutical wholesale licenses from a number of states, sparking investor fears that it could try to enter the drugstore market.

Similar fears of Amazon competition had sparked a fall in Staples, Inc. bonds on Tuesday and again on Wednesday – but those bonds were seen on the rebound on Thursday.

Intelsat SA’s notes fell, along with the communications satellite company’s shares, on disappointing third-quarter numbers.

And traders saw some improvement Thursday in aircraft maker Bombardier Inc.’s notes. On Wednesday, that paper had lost altitude across the board as the company said it is reviewing delivery plans for its new C-Series aircraft in light of problems with the separately manufactured engines, while rival Boeing Co. said it will continue to press its unfair trade practices case against Bombardier despite the recently announced deal to have Airbus take control of Bombardier’s C-Series aircraft program and do final assembly on the planes in Alabama.

Rite Aid retreats

Traders saw a big fall in Rite Aid’s paper on Thursday.

“There was weakness in Rite Aid on renewed Amazon fears,” one said, quoting the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator’s 6 1/8% notes due 2023 down nearly 3 points on the day, falling below 93 bid.

Another trader agreed, seeing the notes down 3 points at 92¾ bid on volume of more than $47 million, easily Junkbondland’s busiest credit of the day.

Rite Aid’s 6¾% notes due 2021 fell 1 5/8 points to end at 99 5/8 bid, on more than $12 million of turnover.

He said the bonds fell “after headlines about Amazon obtaining pharmaceutical licenses in a bunch of states spooked investors.”

The St. Louis Post-Dispatch reported that Amazon had attained authorization for wholesale pharmacy licenses in about a dozen states, sparking fears that the internet retailing behemoth would try to muscle into the prescription drug business at the expense of established operators such as Rite Aid and its large rivals CVS Caremark and Walgreens-Boots Alliance.

Rite Aid’s New York Stock Exchange-traded shares dropped by 11 cents, or 6.18%, to end at $1.68 on volume of 34.2 million shares, around 1½ times the norm.

Staples straightens out

Similar investor fears of possible Amazonian domination of its industry had bedeviled the bonds and shares of Framingham, Mass.-based office supplies retailer Staples on Tuesday and again on Wednesday.

But in Thursday dealings, a trader said that Staples’ 8½% notes due 2025 “did a little better,” a trader said. He quoted the notes at 90¼ bid, calling that a ¾ point gain.

He saw them rally “a point to 1½ points” to around 91½ bid, with over $22 million having traded.

Intelsat slides

Traders saw Intelsat’s paper trade down, after the Luxembourg-based communications satellite company reported disappointing third-quarter earnings.

Intelsat “was obviously active on their earnings, and weaker,” one trader said, seeing the company’s Intelsat (Luxembourg) SA 7¾% notes due 2021 “down a couple” of points at 66½ bid, 67 offering, with over $38 million traded.

He said that its Intelsat Jackson Holdings SA 9¾% secured notes due 2025 eased by 1 to 1¼ points to bid levels around 101 to 101½ on volume of over $24 million.

Its NYSE-traded shares swooned by $1.15, or 19.36%, ending at $4.79. Volume of 2.65 million was over four times the norm.

Company executives meanwhile said that Intelsat – which did a big junk bond deal earlier in the year to refinance bonds coming due in 2019 – had ample time to consider its options for its term loan debt maturing in 2019, as well as its Intelsat Jackson bonds due in 2020 and 2021 (see related story elsewhere in this issue).

Bombardier bounces

Traders saw Bombardier bonds – which were battered around on Wednesday – doing better on Thursday.

One said there was “not really” much activity in the credit, seeing its 7¾% notes due 2020 up 1/8 point at 107 7/8 bid, with more than $18 million traded.

Its 6% notes due 2022 ended up by 9/32 point at 99 ½ bid, with more than $10 million traded.

On Wednesday, the Montreal-based aircraft manufacturer’s paper had fallen sharply in active trading across its capital structure as the company said it was reviewing delivery plans for its new C-Series aircraft in light of problems with the separately manufactured engines.

Bombardier rival Boeing Co. meantime declared this week that it would continue to press its trade case against Bombardier with the U.S. Commerce Department, despite the recently announced deal to have European aerospace giant Airbus take control of Bombardier’s C-Series aircraft program and do all final assembly work on the planes in Alabama rather than in Canada.

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