Bon-Ton issues fall on bankruptcy news; Northern Oil notes lose on rating downgrade

By James McCandless

San Antonio, Feb. 5 – The distressed debt market opened the week slowly on Monday, only starting to follow the raucous downward activity of the stock market near the end of the day’s trading, market sources said.

Bon-Ton Stores, Inc. notes sunk as the company filed for Chapter 11 bankruptcy over the weekend, precipitating a ratings downgrade.

Northern Oil and Gas, Inc. continued last week’s high volume trading as the company received a ratings downgrade. The company announced a note exchange agreement last week that includes raising new equity and management changes.

Remaining heavily traded, Revlon, Inc. paper fell again. The company experienced the departure of its chief executive officer and a rating agency downgrade.

Adding heavily to the day’s volume were Frontier Communications Corp., Intelsat SA and Mallinckrodt plc.

Bon-Ton bankrupt

Issues in York, Pa.-based department store name Bon-Ton Stores saw a second day of heavy trading as the company declared Chapter 11 bankruptcy on Sunday, court filings disclosed. The company says it will use the Chapter 11 process to explore “strategic alternatives to maximize value” for its shareholders, which may include selling the company or a portion of its assets. Standard & Poor’s revised its corporate credit rating to D. (See related stories elsewhere in this issue.)

“A lot of today’s activity was a large stakeholder selling out of their position,” a market source said.

The 8% notes due 2021 fell more than 4 points to close at around 13½ bid.

Northern Oil downgraded

Minnetonka, Minn.-based independent oil and gas producer Northern Oil and Gas issues fell again as S&P lowered its corporate credit rating to CC and affirmed a negative outlook, a trader said. (See related story elsewhere in this issue.) Last week, the company announced it would be offering an exchange for a majority of its 8% notes due 2020 for new notes due 2023 and common stock, with additional plans to raise new equity and make changes to management.

Those notes slipped 2 points to close at 88½ bid

Revlon paper falls

Paper in New York City-based cosmetics producer Revlon were as active Monday as they had been in previous sessions, according to a trader. The company’s activity stemmed from news last week that CEO Fabian Garcia would be leaving the company after proving unable to reverse an increasing loss in revenue. The company also received a ratings downgrade from Moody’s Investor Service.

The 5¾% notes due 2021 fell ½ point to close at 81 bid. The 6¼% notes due 2024 dropped ¾ point to close at 65¾ bid.

Popular names trade

Notes in the Norwalk, Conn.-based wireline telecom Frontier Communications remained mixed Monday. The company continues to be a volume favorite on recent news that it attained amendments to its credit agreements, according to a trader. The 7 5/8% notes due 2024 increased by about ½ point to end at around 66¼ bid. The 10½% notes due 2022 fell slightly to close just under 83½ bid. The 11% notes due 2025 fell ½ point to close at 77 ½ bid.

Luxembourg-based satellite communications company Intelsat’s issues experienced their usual high volume activity. The Intelsat Jackson SA 7¼% issues due 2020 fell almost ¾ point to close just above 85¼ bid. Intelsat (Luxembourg) SA’s 7¾% notes due 2021 rose more than ½ point to finish at 45½ bid.

Britain-based drug maker Mallinckrodt has seen a spike in trading in recent days, a market source confirmed.

“They have been active the last couple of days,” a trader said. “They’ve been getting absolutely killed as people call for lower drug prices.”

The 4¾% notes due 2023 fell more than 2 points to close near 79¼ bid.

The trader said that after a few active days in the market, people are ready to resume high volume distressed trading.

“I think you need a couple of days like this in order for people to see that this is not just a one-day abnormality,” the trader said. “People are starting to think that rates are getting blown out and the market is heading lower. We might start to see more high-yield and distressed stuff fall off the shelf.”

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