Retail, including Bon-Ton, J.C. Penney, mixed after J. Crew results; Valeant turns corner; oil down

By Colin Hanner

Chicago, March 22 – Volume was light in the distressed market on Wednesday, traders said, with movement tending to trade tight, especially in the retail sector, where developments from a big-box retailer and fashion retailer set the tone in that space.

“Volume was not so big today,” one trader said, while another trader added focus remained on the new-issue space.

In the retail arena, J. Crew Group, Inc. announced its fourth quarter results on Tuesday evening, to a mostly positive consensus, while Sears Holding Corp. expressed doubts in its annual report.

“Our historical operating results indicate substantial doubt exists related to the company's ability to continue as a going concern,” Sears said in a 10-K filed with the Securities and Exchange Commission.

Fashion retailers Bon-Ton Department Stores, Inc., Tailored Brands, Inc. and J.C. Penney Co., Inc. were mixed.

Valeant Pharmaceuticals International Inc. rebounded on the session after several sessions trending downward. On Tuesday night, the company announced it had closed refinancing transactions, according to a company news release.

In the exploration and production sphere, California Resources Corp. was down and MEG Energy Corp. followed with an even steeper loss of its own.

Intelsat Luxembourg Holdings SA traded higher, iHeartCommunications, Inc. was down and flat in two of its issues, respectively, and several one-offs traded on the mid-week session.

Retail wobbles

The fragile distressed retail space – pressured by the increasing use of e-commerce, decreasing number of customers visiting brick-and-mortar stores and large debt loads – looked to J. Crew Group’s announcement of its quarterly earnings on Tuesday.

Its 7¾% notes due 2019 were up “close to another point” to 46¾, a trader said, adding that they were not “super active.”

Though total revenues decreased 2% to $695 million, J. Crew’s Madewell brand saw increased sales of 11% to $102.9 million. Adjusted EBITDA for J. Crew was $51.1 million, compared to $44 million in the fourth quarter a year prior, more than a 15% increase. Operating losses were $1.1 million compared to a $7 million loss in last year’s fourth quarter.

Elsewhere in the distressed retail space, several companies were mixed on the session.

Tailored Brands – which operates Men’s Warehouse – was down ½ point in its 7% notes due 2022, which settled with an 88½ handle.

Bon-Ton Stores’ 8% notes due 2022 were down ½ point to 42, a trader said.

And J.C. Penney’s 6 3/8% notes due 2036 were up ¼ point to 76, while the 7.4% notes due 2037 were down 5/8 to 79 3/8.

A trader said Neiman Marcus Group, Inc.’s 8% notes due 2021 were hovering in the high-50 zip code, similar to Tuesday’s levels, but did not have any noteworthy volume.

Valeant up

Transactions intended to reduce the amount of debt maturing before 2020 were finalized on Tuesday evening for Lavel, Quebec-based Valeant Pharmaceuticals.

Its 7½% notes due 2021 were up ¼ point to 85¼, a trader said. Those same notes were down 1½ points on Tuesday.

The company used proceeds of two sets of senior secured notes and new term loans, as well as cash on hand, to repay term loans under its credit facilities maturing from 2018 to 2020, $350 million of revolver borrowings and $1.1 billion of its 6.75% senior notes due 2018, a news release said.

In energy

Oil continued to fall on Wednesday amid speculation that the Organization of Petroleum Exporting Countries’ cuts to global supply are not enough to curb the worldwide glut, particularly since figures from the Energy Information Agency showed U.S. crude supplies increased last week.

In the distressed market, California Resources’ 8% notes due 2022 were down ½ point to 78, two traders said.

Canadian oil sands producer MEG Energy’s 7% notes due 2024 were down 2 points to 86.

Plano, Tex.-based oil and natural gas exploration and production company Denbury Resources Inc.’s 6 3/8% notes due 2021 were down 1½ points to 82¾, a market source said.

And Houston-based marine transportation company GulfMark Offshore, Inc., which supports offshore energy producers, saw a ½-point decrease in its 6 3/8% notes due 2022, which finished at 49½.

Market roundup

Two issues of iHeartCommunications saw active trading on the session, a trader said, but only one saw any movement.

The 9% notes due 2021 were down 1½ points to 75, while the 14% notes due 2021 were unchanged at 34.

Seeing a “handful of trades” were Frontier Communications Corp.’s 6 7/8% notes due 2025, which were down ¼ point to 81¼, a trader said.

Intelsat Luxembourg Holdings’ 8 1/8% notes due 2023 were up ¼ point to 59¾.

Its 7¼% notes due 2021 were up 1 point to 60½.

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