Sears paper off on Whirlpool news; other retailers off but Toys up; hospital credits mixed

By Paul Deckelman

New York, Oct. 23 – Traders in the bonds of distressed and otherwise underperforming companies reported some activity in the retailing space on Tuesday.

They said traders that Sears Holdings Corp.’s notes fell sharply on the news that the company has parted ways with equally iconic home appliance vendor Whirlpool, whose washing machines, refrigerators and other appliances had been fixtures in Sears stores for over a century – the latest body blow to the venerable but now-struggling retailer whose former empire of far-flung stores and catalog operation once dominated the American retailing scene.

Elsewhere among retailers, druggist Rite Aid Corp. and supermarket operator Fresh Market were seen lower.

But the reorganizing Toys ‘R’ Us was seen having firmed up.

Coal operator Murray Energy Corp. notes were seen active, though little changed.

Among hospital companies, Tenet Healthcare Corp. and Community Health Systems, Inc.’s paper was seen mixed.

Sears on the slide

A trader said that Sears Holdings’ 8% notes due 2016 swooned by 6 points on the day, finishing at 60½ bid, though only on round-lot volume of around $5 million.

There were also numerous smaller round-lot trades late in the day as low as 56 bid.

“This was credit related,” the trader said, noting that investors reacted badly on the news of “Whirlpool getting pulled.”

Sears , the Hoffman Estates, Ill.-based retailer’s bonds fell on the news that the largest U.S. appliance company, Whirlpool, will no longer be carried in Sears stores, where its Whirlpool, Maytag and Kitchen Aid branded washers, dryers, refrigerators and other appliances had been a mainstay for the previous 101 years.

Whirlpool informed Sears in May that it would no longer supply Sears’ eponymous flagship store chain and the company’s Kmart discount department store operation, with its products, after the two companies could not agree on pricing.

The trader said “we’ll see if other vendors follow suit” and stop supplying the troubled Sears, agreeing with the suggestion that a decision by a high-profile supplier such as Whirlpool could open the floodgates for other vendors to also decide that doing business with Sears is no longer profitable for them.

“That seems to be the thinking,” he said.

Retailing names mixed

Elsewhere within the retailing realm, a market source said that St. Louis-based grocer Fresh Market’s 9¾% notes due 2023 dropped by ¾ point Tuesday, to 58¼ bid, with over $11 million having traded.

Camp Hill, Pa.-based drugstore chain operator Rite Aid Corp.’s 6 1/8% notes due 2023 eased by 1/8 point, closing at 96 1/8, on turnover of more than $17 million.

However, bankrupt Wayne, N.J.-based specialty retailer Toys ‘R’ Us’ 7 3/8% notes due in October of 2018 gained 1½ point to close at 43½, though on “really light volume,” a trader said.

Murray bonds busy

A trader said that Murray Energy Corp.’s 11¼% notes due 2021 “traded actively today,” with over $19 million having changed hands, though the notes were unchanged on the day, closing at 60 bid.

He did not know why there was that level of interest in the St. Clairsville, Ohio-based coal producer’s paper.

Hospital names mixed

In the healthcare area, a trader said that Dallas-based hospital operator Tenet Healthcare Corp.’s 8 1/8% notes due 2022 improved by ¾ point to end at 83½ bid, while Franklin, Tenn.-based sector peer Community Health Systems Inc.’s 6¼% notes due 2023 fell back by ¼ point to end at 97½ bid, both on around $10 million of volume.

Canadian drugmaker Valeant Pharmaceuticals International Inc.’s 6 1/8% notes due 2025 were off by 3/8 point on the day at 85 5/8 bid, on volume of over $10 million

Ionis trades off

In the convertibles market, Ionis Pharmaceuticals Inc.’s converts were down in active trading on Tuesday as shares of the Carlsbad, Calif.-based developer of gene-based drugs stumbled 12.4%.

The Ionis 1% convertible notes due 2021 were seen at 112 versus an underlying share price of $56.20. But shares closed lower at $55.01, which was down $7.79.

Ionis “is pretty active because of the stock,” a New York-based trader said.

Ionis’ webcast on third-quarter results and pipeline progress is set for Nov. 7.

Rebecca Melvin contributed to this review

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