QVC, Qurate notes rally after upbeat earnings post; bank paper, preferreds rebound

By Cristal Cody

Tupelo, Miss., May 5 – Home shopping network QVC Inc.’s notes rallied on Friday after parent Qurate Retail Inc. reported higher first-quarter earnings.

QVC’s 5.45% senior secured notes due 2034 (B2/B-) climbed as high as 6 points before pulling back slightly to head out 4 points better on the day, a source said.

Qurate Retail’s 8½% notes due 2029 also improved about 2 points to 2½ points over the session.

Retail paper was seen higher on Friday after the Labor Department reported that 253,000 jobs were added in April, much higher than the forecasted 185,000 increase.

The unemployment rate declined to a seasonally adjusted 3.4%, lower than the 3.6% rate expected and the lowest rate since May 1969, market sources said.

Stocks improved on Friday after staying soft since the Federal Reserve’s rate hike on Wednesday.

The S&P 500 index closed up 1.85%.

The CBOE Volatility index declined 14.44% by the close to 17.19.

The iShares iBoxx High Yield Corporate Bond ETF added 40 cents, or 0.54%, to $74.76.

Regional bank paper and shares also gained on Friday, sources reported.

First Republic Bank’s 4 3/8% subordinated notes due 2046 (C/B-) were up about ½ point to around the 1¾ bid area in thin trading on Friday, a source said.

The notes sank this week after the bank was sold to JPMorgan Chase & Co. on Monday.

First Republic’s subordinated notes plunged to pennies by Tuesday on wide expectations of a default.

JPMorgan’s purchase of the bank does not include its corporate debt or preferred stock.

On March 31, First Republic reported $3.6 billion of preferred stock and $800 million of subordinated notes outstanding, according to a report from Moody’s Investors Service.

Regional banks that were under renewed pressure this week, including Western Alliance Bancorp and PacWest Bancorp, saw a turnaround on Friday.

Western Alliance’s notes, which sank 10 points to more than 30 points in the prior session, improved in light trading.

The 3% notes due 2031 (Ba1) were last seen on the rebound with a 60 bid handle after sinking nearly 20 points on Wednesday and Thursday, a source said.

Western Alliance’s stock surged 49.23% by the close to $27.16 on heavy trading volume on Friday.

PacWest Bancorp also improved after selling off on Thursday after the company reported it has explored strategic asset sales and options with the stock closing Friday up 81.7% at $5.76.

PacWest’s $500 million of $25-par 7¾% perpetual preferred stock (//B) rallied 31.25% on the day to $8.19.

The KBW Regional Banking index went out up 4.68% at 82.38.

The KBW Bank index has fallen about 26% this year, according to a KBRA report on Friday.

The SPDR S&P Regional Banking ETF also was up 6.29% at 38.35 by the day’s end.

QVC bonds gain

QVC’s 5.45% senior secured notes due 2034 (B2/B-) went out 4 points better on the day at 46¾ bid, a source said Friday.

Parent Qurate Retail’s 8½% notes due 2029 also climbed about 2 points to 2½ points over the session, going out 2½ points better at 33¼ bid.

The West Chester, Pa.-based home shopping network owner on Friday reported in its first-quarter earnings release that it has strong liquidity and expects “to see material improvement in our profitability in the back half of this year.”

Revenue was down 8% in the first quarter, while earnings were higher at $20 million versus $1 million in the same period last year.

Total debt at Qurate Retail decreased $102 million in the first quarter. Qurate Retail said in the release Friday that it repaid the remaining $214 million of QVC’s 4 3/8% senior secured notes at maturity in March and settled $157 million of exchanges of its LI LLC Charter exchangeable debentures.

Distressed index down

S&P U.S. High Yield Corporate Distressed Bond index one-day returns dropped Thursday to minus 0.7%, compared to 0.21% on Wednesday, minus 0.21% on Tuesday and 0.01% on Monday.

Month-to-date total returns declined to minus 0.69% Thursday from 0.1% on Wednesday, minus 0.2% on Tuesday and 0.01% at the start of the week.

Year-to-date total returns fell to 6.58% from 7.33% on Wednesday, 7.11% on Tuesday and 7.34% on Monday.

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