PetSmart notes gain again amid ratings downgrade; Intelsat mixed on pending note buyback

By James McCandless

San Antonio, June 14 – Volume in the distressed debt market was largely focused on news-driven names while the rest of the market saw a relatively quiet day.

PetSmart, Inc. notes rose again amid a ratings downgrade. This week, the company is working to return to creditors’ good graces after transferring 36.5% of its e-commerce business out of their hands.

Intelsat SA issues were mixed. On Monday, the company announced that it would use proceeds from common stock and convertible offerings to buy back its 7¾% notes due 2021.

Northern Oil and Gas, Inc. paper improved. On Tuesday, the company announced an exchange of a portion of its 8% senior notes due 2020 for stock.

Frontier Communications Corp. notes were mixed. The company failed to attain a satisfactory bid in a recent auction for its Florida assets. Community Choice Financial Inc. issues fell. On Monday, a debt restructuring agreement was reached with its largest noteholder. Mallinckrodt plc paper rose.

PetSmart up

Phoenix-based pet supplies retailer PetSmart notes traded up again, market sources confirmed, despite a ratings downgrade. Standard and Poor’s lowered its corporate credit rating and affirmed a negative outlook (see related story elsewhere in this issue).

On Wednesday, reports surfaced that the company had pegged the value of e-commerce arm Chewy.com at $4.45 billion in an attempt to calm creditors who were concerned about the company’s transfer of its 36.5% stake in Chewy out of their hands and into a private equity firm and an unrestricted subsidiary.

Last week, the company hired investment bank Houlihan Lokey, Inc. as restructuring advisers for its $8 billion in debt.

The 5 7/8% notes due 2025 gained about ½ point to close at around 77 bid. The 8 7/8% notes due 2025 gained ¾ points to close at 62¾ bid.

On Wednesday, the 5 7/8% notes traded up about 1½ points and the 8 7/8% notes rose about 3½ points.

Intelsat mixed

Luxembourg-based satellite communications company Intelsat issues were mixed, traders confirmed. On Monday, the company announced that it would buy back its Intelsat (Luxembourg) SA 7¾% senior notes due 2021 using proceeds from an offering of $200 million of common shares and $300 million of convertible senior notes due 2025.

The 7¾% notes due 2021 shaved off ½ point to close at 90 bid. The 8 1/8% notes due 2023 rose about 1 point to close at around 79 bid.

On Wednesday, the 7¾% notes lost 1¾ points, and the 8 1/8% notes fell 5 points.

Northern Oil improves

Minnetonka, Minn.-based independent oil and gas company Northern Oil and Gas paper rose, market sources confirmed. On Tuesday, the company announced that it had exchanged of $20.95 million of its 8% senior notes due 2020 for stock in a debt reduction move. The exchanges were carried out in two separately negotiated agreements with institutional holders.

The 8% paper due 2020 gained about ¾ point to close at around 98¾ bid.

On Wednesday, the 8% paper lost about ½ point.

Volume names trade

Norwalk, Conn.-based wireline name Frontier Communications notes were mixed. A recent auction failed to garner a satisfactory bid for it Florida assets.

The 7 5/8% notes due 2024 rose ½ point to close at 75½ bid. The 10½% notes due 2022 edged up about ¼ point to close at 93 bid. The 11% notes due 2025 were level at 84 bid.

Dublin, Ohio-based financial services company Community Choice issues fell. On Tuesday, the company reached a debt restructuring agreement with its largest noteholder.

The 10¾% notes due 2019 dropped about 1¾ points to close at around 76½ bid.

Britain-based drug maker Mallinckrodt saw its 4¾% paper due 2023 jump 1¼ points to close at 82½ bid.

“There hasn’t been a lot of activity this week,” a trader said. “The interest rate hike hasn’t affected us as much is it might have, but it could take more time to feel the full effect.”

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