PetSmart notes trade up amid hiring advisers; Community Heath mixed as exchange offer amended

By James McCandless

San Antonio, June 6 – Traders reported another light day in the distressed debt market on Wednesday, with movement restricted to news-driven names.

PetSmart, Inc. notes continued to rise as the company hired advisers to help contain and reduce its $8 billion in debt.

Community Health Systems, Inc. issues were mixed after a subsidiary amended the terms of an exchange offer.

Murray Energy Corp. paper rose again after the company announced an agreement reached on Monday with a portion of its noteholders and lenders on debt restructuring.

Intelsat SA notes were mixed. Recently, the company released a concerning Q1 report. Frontier Communications Corp. issues fell. The company recently presided over a failed auction for its Florida assets. Mallinckrodt plc paper gained.

PetSmart continues rise

Phoenix-based pet supplies retailer PetSmart notes traded up again as reports confirmed that the company has hired investment bank Houlihan Lockey, Inc. as restructuring advisers. The firm is tasked with finding solutions for reducing the company’s $8 billion in debt.

On Tuesday, the company rattled its debt investors by moving 36.5% of its stake in e-commerce segment Chewy.com to its private equity owner BC Partners and an unrestricted subsidiary. The site was purchased last year for $3.35 billion, partially financed with $2 billion of debt.

“We hate it,” a trader said. “It leaves some bondholders, especially the unsecured ones, without access to that collateral. The company could just keep moving that and eventually IPO it.”

The 5 7/8% notes due 2025 jumped up about 1¾ points to close at around 75¾ bid. The 8 7/8% notes due 2025 rose 3 points to close at 58 bid.

On Tuesday, the 5 7/8% and 8 7/8% notes gained about 2¼ points.

Community Health mixed

Franklin, Tenn.-based hospital operator Community Health Systems issues were mixed, market sources confirmed, as subsidiary CHS/Community Health Systems, Inc. amended the terms of its exchange offers because the amount tendered for exchange fell short of the 90% threshold for one series.

The amendment increases the coupon on the 2023 notes to 11% for one year after issue, up 112.5 basis points from 9 7/8% (see related story elsewhere in this issue).

The company has been extending an early payout deadline in the exchange offer.

The 7 1/8% notes due 2020 were level at 85¼ bid. The 6 7/8% notes due 2022 gained about 4¼ points to close at around 55¼ bid.

On Tuesday, the 7 1/8% notes fell about ¼ point and the 6 7/8% notes lost 2 points.

Murray Energy up

St. Clairsville, Ohio-based coal producer Murray Energy paper continued to rise, traders confirmed. On Monday, the company made an agreement with a portion of its noteholders and bank lenders on a debt restructure plan that will refinance its 11¼% senior secured notes due 2021 and its term loans.

Holders of 71% of the 11¼% notes and 61% of the term loans have entered into a transaction support agreement with the company to participate in the refinancing.

“Since that deal was made, those notes have just kept on rising,” a trader said.

The 11¼% notes due 2021 rose about 2½ points to close at 59¼ bid.

On Tuesday, the 11¼% notes gained 1 point.

Volume names trade

Luxembourg-based satellite communications company Intelsat notes were mixed. A recent Q1 report showed a 56 cents per share loss, missing analyst estimates of 41 cents per share.

The Intelsat (Luxembourg) SA 7¾% notes due 2021 rose 1½ points to close at around 84½ bid. The 8 1/8% notes due 2023 lost about 2 points to close at around 79½ bid.

Norwalk, Conn.-based wireline name Frontier Communications issues declined. A recent failed auction for the company’s Florida assets has hurt investor confidence.

The 7 5/8% notes due 2024 fell about ¼ point to close at around 69¼ bid. The 10½% notes due 2022 lost about ¼ point to close at around 90½ bid. The 11% notes due 2025 slipped about 1¾ points to close at 81 bid.

Britain-based drug maker Mallinckrodt saw its 4¾% paper due 2023 pick up about ¼ point to close at 81¼ bid.

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