PetSmart notes improve on reports of better earnings; Intelsat paper trades mixed

By James McCandless

San Antonio, Sept. 12 – The distressed debt market continued the week in trading focusing on many of the same names with recent news.

PetSmart, Inc.’s notes gained on reports that its recent private earnings report was better than expected, especially in its online business.

Intelsat SA’s notes traded mixed again. On Monday, a subsidiary commenced a cash tender offer.

Community Choice Financial Inc.’s paper declined.

Frontier Communications Corp.’s notes improved. A recent second-quarter earnings report missed analyst predictions and led to a ratings downgrade.

American Tire Distributors’ securities fell. The company recently reached a recapitalization agreement with bondholders.

Sanchez Energy Corp.’s paper gained again following rising oil futures.

PetSmart rises

PetSmart notes jumped upward, traders said.

The 8 7/8% notes due 2025 were up about 5½ points to close at 74½ bid. The 5 7/8% notes due 2025 added ½ point to close at 85 bid.

The gains come a day after the company released its second-quarter earnings report, surprising investors with better-than-expected numbers, especially in its online segment, Chewy.com.

“The company’s private, so we don’t have a lot of access to those numbers,” a trader said. “But the people who do seem to be happy, so the bonds have taken to rising.”

The company has yet to settle a dispute with its bondholders over a recent equity transfer, moving a significant portion of Chewy.com into private hands and out of the reach of creditors.

PetSmart is a Phoenix-based pet supplies retailer.

Intelsat mixed

Elsewhere, Intelsat’s issues traded mixed again, market sources said.

The Intelsat Jackson Holdings SA 5½% notes due 2023 gained ¼ point to close at around 91 bid. The Intelsat (Luxembourg) SA 8 1/8% notes due 2023 lost ½ point to close at 85¼ bid.

On Tuesday, the 5½% notes lost about ¼ point and the 8 1/8% notes picked up about ¾ point.

A week ago, a subsidiary priced $2.25 billion of six-year senior notes and also announced a tender offer. The tender offer was predicated by the issuance of the new notes.

Intelsat is a Luxembourg-based satellite communications company.

Community Choice down

Community Choice’s paper saw another decline, traders said.

The 10¾% notes due 2019 lost ½ point to close at 28 bid, giving up the ¼ point move upward seen a day earlier.

Late Friday, the company announced a new $45 million revolving credit facility. The terms of the financing require the company to exchange two-thirds of its 10¾% senior secured notes due May 1, 2019 and its 12¾% senior secured notes due May 1, 2020 for equity by Nov. 30.

Community Choice is a Dublin, Ohio-based alternative financial services company.

Volume names trade

Elsewhere in distressed telecom trading, Frontier Communications notes improved.

The 7 5/8% notes due 2024 picked up about 1 point to close at around 63½ bid. The 10½% notes due 2022 rose ½ point to close at 88½ bid. The 11% notes due 2025 gained 1¼ points to close at 78½ bid.

A recent second-quarter earnings report led S&P Global Ratings to downgrade Frontier’s issuer credit rating and senior unsecured debt rating and affirm a negative outlook.

Frontier is a Norwalk, Conn.-based wireline communications name.

Separately, Huntersville, N.C.-based tire distributor American Tire’s issues fell.

The 10¼% notes due 2022 lost ½ point to close at 28 bid.

The company recently reached a recapitalization agreement with 70% of its bondholders. The deal reduces its debt by $1.1 billion. The company is also working to extend the maturity of its revolving credit facilities and term loan.

“When they work through those problems, you could see a rise in the bonds,” a trader said. “But for now, it’ll stick to the 20 to 30 range.”

Meanwhile, Houston-based independent oil and gas producer Sanchez Energy’s paper rose again, following oil futures.

The 6 1/8% paper due 2023 rose about ½ point to close at 54¾ bid.

On Tuesday, the 6 1/8% paper added about 1 point.

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