Valeant lower as Ackman exits shares; Neiman Marcus gains on sale talks report; energy slide continues

By Paul Deckelman

New York, March 14 – Valeant Pharmaceuticals International Inc.’s new issue as well as its existing bonds – the latter already recently under pressure on investor worries about how pharmaceutical and other healthcare companied might fare should Obamacare be repealed in the U.S. – retreated further on Tuesday, in line with a slide in its shares after billionaire investor Bill Ackman’s Pershing Square hedge fund liquidated its entire position in the troubled Canadian drugmaker, taking a multi-billion-dollar haircut.

But Neiman Marcus Group’s notes were higher in active dealings, on the news that the struggling luxury retailer is exploring strategic options that could include the sale of the company – and is reportedly in talks about such a transaction with Canada’s Hudson’s Bay Co., which already controls Neiman-Marcus’s high-end rivals Saks Fifth Avenue and Lord & Taylor.

Elsewhere, Walter Investment Management Corp.’s notes fell sharply, in line with its shares, as the residential mortgage servicing company reported a fourth-quarter loss.

Energy issues such as California Resources Corp. and Chesapeake Energy Corp. continued to lose ground on Tuesday, as world crude oil prices took another big hit.

New Valeants ease

Valeant Pharmaceuticals International’s two new tranches of bonds – which heretofore had firmed and had managed to hold onto those gains – were also slightly easier on Tuesday.

Its 7% notes due 2024 were seen off by nearly ½ point on Tuesday, ending at 101½ bid, a trader said, on volume of over $30 million, while its 6 ½% notes due 2022 lost more than ½ point to finish at 101 3/8 bid, with over $17 million having traded.

The Laval, Que.-based drugmaker had priced $1.25 billion of the five-year notes and $2 billion of the seven-years, both at par, in a regularly scheduled forward calendar offering last Thursday, and both tranches had firmed smartly in the aftermarket, each getting up to around a 101½ to 102 bid context.

A trader agreed with the suggestion that the new Valeant bonds had weakened, along with the company’s existing paper,

A trader agreed with the suggestion that those bonds had finally cracked under pressure and had moved lower, along with the already-weakened existing paper, in line with a slide in the company’s New York Stock Exchange-traded shares; the stock swooned by $1.22, or 10.07%, ending at $10.89, on more than four times its normal volume, pushed down by the news that major shareholder Pershing Square, helmed by billionaire investor Bill Ackman, had liquidated its more than $4 billion position, taking a sizable loss after losing confidence in Valeant’s efforts to turn the company’s struggling finances around.

Existing Valeant paper drops

The Ackman news was a further blow to the company’s already existing bonds, which had already been battered over the past week by investors pulling out of them to play in the new deal, as well as by investor angst over the prospects for pharmaceutical companies such as Valeant should the U.S. healthcare laws undergo major changes.

Its 6 3/8% notes due 2020 fell by 1 point on Tuesday to 89 bid, with about $16 million having traded.

Valeant’s 5½% notes due 2023 dropped by 1½ points, to 74¼ bid, with over $15 million having traded.

And its 5 3/8% notes due 2020 were down by more than a deuce on the day, to 87 7/8 bid, on volume of over $13 million.

Neiman Marcus up on M&A hopes

Elsewhere, Neiman Marcus Group’s recently beleaguered paper was solidly higher on Tuesday; the high-end Dallas-based department store and catalog retailer’s 8% notes due 2021 were seen by traders up more than 2 points on the day, at 58 bid, on volume of over $55 million, topping the junk market’s Most Actives list.

Its 8¾% notes due 2025 rose more than 1½ points on the day to end at 53 bid, with over 415 million having traded.

The bonds firmed after the company indicated that it was reviewing strategic options, possibly including the outright sale of the whole company.

The Wall Street Journal reported that Neiman Marcus was in possible sale talks with Hudson’s Bay, the Canadian retailing company that already owns two of Neiman Marcus’ competitor in the luxury goods market – Saks Fifth Avenue and Lord & Taylor.

Walter gets walloped

Walter Investment Corp.’s 7 7/8% notes due 2021 were the big losers on the day, traders said.

One quoted the bonds down 8¼ points, at 66¼ bid, on volume of over $17 million.

The fall in the bonds was in line with a nearly 40% plunge in the Tampa, Fla.-based residential mortgage servicing company’s NYSE-traded shares, which ended down $1.05, at $1.55, on over 10-times their normal volume.

The bonds and shares nosedived after the company reported poor fourth-quarter financial results.

It lost $22.2 million in the quarter, or 61 cents per share. Adjusted for one-time gains and costs, the red ink totaled $1.10 per share.

For the year, Walter reported that its loss widened to $529.2 million, or $14.71 per share.

Oil slide continues

It was another tough day for energy names, which have been taking their lumps lately in line with a continued fall in world crude oil prices.

Los Angeles-based exploration and production company California Resources Corp.’s benchmark 8% notes due 2022 plummeted by nearly 3 points on the day, closing at 78 bid, on volume of over $26 million.

Elsewhere in the energy patch, Oklahoma City-based natural gas and oil operator Chesapeake Energy’s 8% notes due 2025 lost more than 11 ¼ points on the day to close just under 94 bid.

Houston-based sector peer EP Energy Corp.’s 8% notes due 2025 were down 5/8 point at 89 5/16 bid, with over $11 million traded.

U.S. benchmark crude grade West Texas Intermediate for April delivery was off by 68 cents per barrel, to $47.72, in Tuesday dealings on the New York Mercantile Exchange, its seventh consecutive daily loss.

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