Amazon’s Whole Foods acquisition causes grocery store downturn; Hornbeck up on credit facility; Intelsat mixed

By Colin Hanner

Chicago, June 16 – The surprising move by Amazon.com Inc. to purchase Whole Foods Market Inc. on Friday morning left grocery store retailers scrambling in all markets, including the distressed debt arena, a trader said.

On the day, though, less than $1.5 billion traded in the high-yield secondary market, a market source said.

Online retail behemoth Amazon purchased Whole Foods for $13.7 billion in what is seen as a move by Amazon to further fuse its e-commerce customer base with grocery shopping. On the day, other grocery store chains reacted poorly to the news, including Fresh Market, Inc., Tops Holding LLC and BI-LO LLC.

“That’s where most of the activity was today,” a trader said.

Distressed oil companies capped a rather tumultuous week in line with the price of crude oil, though Hornbeck Offshore Services, Inc., which provides offshore vessels to the industry, saw the biggest move of the day following the announcement of a refinanced credit facility.

Its bonds were up several points.

Intelsat SA revised its guidance following the longer-than-expected sales process of one of its services, causing a loss for several sets of notes, though the satellite telecommunications company did call $1.5 billion of its 7¼% notes, which traded close to par.

According to media reports, J. Crew Group Inc. met the 50% consent threshold needed from its term loan lenders to amend the term loan agreement.

Bonds were fractionally higher on small volume.

Amazon’s buy hits distressed

On Friday morning, markets were caught off guard when Amazon announced it would purchase the upscale grocer Whole Foods for $42 per share in an all-cash transaction valued at $13.7 billion.

Other grocers, already battling with structural changes in the industry, were blindsided by the news.

Fresh Market’s 9¾% notes due 2023 were down 3¼ points to 84½ on “tons of trading,” a market source said.

Tops Holdings, the parent of Tops Markets, saw a 3-point decrease in its 8% notes due 2022.

And southern-based grocer BI-LO’s 9¼% notes due 2019 were also down 3 points to 85½.

Hornbeck up in ugly E&P week

Offshore vessel provider Hornbeck Offshore saw gains across the board in two sets of issues on the session after the company announced that it secured refinancing for its $200 million senior secured revolving credit facility, replacing it with a first-lien delayed-draw credit facility providing up to $300 million of term loans, the company said in a news release.

The facility can be used for working capital and general corporate purposes, including refinancing existing debt.

Hornbeck’s 5% notes due 2021 were up 7 points to 57, a market source said, while its 5 7/8% notes due 2020 were up 6½ points to 60½.

Though oil ended Friday on a better note – West Texas Intermediate crude was up 0.5 percent to $44.65 a barrel – distressed exploration and production companies continued to trade weaker.

California Resources Corp.’s 8% notes due 2022 were down 1¾ points to 63, a trader said, though they rebounded from mid-morning lows in the 62 area.

EP Energy Corp.’s 8% notes due 2025 were down 1 point to 75.

Noble Holdings International Ltd.’s 7¾% notes due 2024 were down ½ point to 83.

And Pacific Drilling Co.’s 7¼% notes due 2017 were down 3 points to 50½.

Intelsat mixed following revised guidance, call

After Intelsat announced it would redeem the outstanding Intelsat Jackson Holdings SA 7¼% notes due 2019, the notes traded up 1 point to 99½, a market source said.

The redemption price will be par plus accrued interest up to but excluding the redemption date.

Similarly-held 7¼% notes due 2020 were up ½ point to 95.

In addition to that news, Intelsat announced a slight guidance decrease – revenue is now expected to range from $2.15 billion to $2.18 billion from $2.18 billion to $2.225 billion – that caused several notes to lose on the day.

Intelsat Jackson’s 5½% notes due 2023 were down 1½ points to 83.

Intelsat Luxembourg Holdings SA’s 8 1/8% notes due 2023 were down 2 points to 55.

And the 7¾% notes due 2021 were down 1¾ points to 57¼.

Intelsat announced a longer sales process with its Intelsat Epic services, which, in turn, caused new contract signings to be lower than expected, the company said in a 6-K filing with the Securities and Exchange Commission.

J. Crew reaches agreement

According to Reuters, J. Crew reached the 50% threshold needed from term loan holders, buying the company some time with its outstanding debt.

J. Crew’s 7¾% notes due 2019 were up ¾ points to 63¾.

“They were a little higher given the amendment went through,” a market source said.

Elsewhere in retail, Bon Ton Stores Inc.’s 8% notes due 2021 were up 1½ points to 39.

Neiman Marcus Group, Inc.’s 8% notes due 2021 were up ¾ point to 53¼, and its 8¾% notes due 2021 were up ½ point to 46¾.

Susanna Moon contributed to this review

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