Neiman mixed following termination of sale, results; J. Crew gains following exchange offer; oil quiets

By Colin Hanner

Chicago, June 13 – The market picked up after a lackluster Monday session, as retailers stole the space as the most active names on Tuesday in the distressed debt arena, market sources said, with Neiman Marcus Group, Inc. bonds mixed on quarterly results and J. Crew Group, Inc. significantly higher after an exchange offer announcement and quarterly results.

Dallas-based Neiman Marcus’ two issues were mixed after the company announced its third quarter results, which showed that revenue decreased year-over-year.

J. Crew Group’s revenue was also down year-over-year, though bondholders were focused on a private offer that will seek to exchange $566.5 million of upcoming notes.

“[J. Crew] gave bondholders more breathing space,” a market source said. “It appears to have worked.”

California Resources Corp. was unchanged in line with the general move, or lack thereof, in crude oil futures, and several other exploration and production names were mixed on the day.

Also higher after earnings, pet retailer PetSmart Inc.’s bonds were up, though figures of first quarter results were not made public because of the nature of the company.

Nieman moves up after results

Though earnings were overall weaker compared to a year prior, Neiman Marcus’ decision to end talks certainly appeased bondholders on Tuesday, as its more popular issue was higher by several points.

Neiman’s 8% notes due 2021 were up 2½ points on “solid volume” to 55, a market source said, while the retailer’s 8¾% notes due 2021 were off ½ point to 46¼.

Highlights of the results include total revenue of $1.11 billion, a 4.9%-decrease year-over-year, as well as a net loss of $24.9 million, compared to $3.8 million in net earnings a year prior.

In an earnings call with investors on Tuesday, Neiman’s chief executive officer Karen Katz said that any deal in the works – rumors had whispered of a deal mainly between Hudson Bay Co., and lesser so with Related Cos. – had been “terminated.”

J. Crew exchange offer causes surge

Retailer J. Crew announced a private exchange offer on Tuesday that seeks to refinance the company’s 7¾% and 8½% notes due 2019 notes to reduce the company’s debt and extend the maturity of said notes. Currently, the company has more than $2 billion in debt.

On the day, J. Crew’s 7¾% notes due 2019 were up 8 points to 59¾, a market source said, while a trader saw the notes go out with a 60 handle.

A minimum of 95% of the notes must be tendered for the exchange offer to be accepted.

Also on Tuesday, J. Crew announced first quarter results, the highlights of which included revenues of $532 million, a 9% decrease, as well as a J. Crew sales of $428.5 million, a decrease of 12%.

Madewell, J. Crew’s women’s retail arm, saw sales increase 17% to $84.7 million.

Energy mixed

Ahead of weekly industry data provided by the Energy Information Administration, estimates showed that U.S. inventories may be heading for an increase yet again, a catalyst that helped drive oil prices down last week.

West Texas Intermediate crude was about unchanged, hovering around $46 a barrel.

California Resources’ 8% notes due 2022 were unchanged at 69, a market source said.

Offshore drilling contractor Ensco plc 5¾% notes due 2024 were up ¾ point to 65½.

Houston-based EP Energy Corp.’s 8% notes due 2025 were down ½ point to 85¾.

Bristow Group Inc., Houston-based provider of helicopter services to the offshore energy drilling industry, was down 1¼ points to 68 in its 6¼% notes due 2022, two sessions after it soared several points on news that the company would restructure its operations.

In the coal space, St. Clairsville, Ohio-based Murray Energy Corp.’s 11¼% notes due 2021 were up ¾ point to 77½.

Distressed wrap

PetSmart bonds jumped on earnings on Tuesday, a market source said, with the 8 7/8% notes due 2025 up 1½ points to 96½. Earnings results were not made public due to the private nature of the company.

Car rental company Hertz Corp.’s 7 3/8% notes due 2021 were up 1/8 point to 93.

And Valeant Pharmaceuticals International Inc.’s 6 1/8% notes due 2025 were up 2 points to 82 5/8, matching gains its other notes made late last week after the company announced it had agreed to sell its iNova Pharmaceuticals business for $930 million.

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