Sears notes crash on reports that company is prepping for bankruptcy; energy paper sinks

By James McCandless

San Antonio, Oct. 10 – As equity markets tumbled in Wednesday’s session, distressed securities followed suit.

After numerous reports surfaced overnight that the company is preparing to file for bankruptcy, Sears Holdings Corp.’s notes crashed.

The weakness spread to competitors J.C. Penney Co., Inc. and Neiman Marcus Group Inc.

Energy names were also weaker amid the equity market decline, with bellwether names Sanchez Energy Corp. and California Resources Corp. mostly lower.

Sable Permian Resources, LLC’s paper also moved lower.

Westmoreland Coal Co.’s notes have fallen after the company filed for bankruptcy on Tuesday.

Amid the negativity, FerrellGas Partners, LP’s issues saw a bright spot.

In telecom, Wind Tre SpA’s notes declined even as the company received a ratings upgrade.

Sears plunges

Sears’ notes were largely negative, traders said.

The 7% bonds due 2032 lost 4¼ points to close at 48 bid. The 8% notes due 2019 dropped 13¾ points to close at 12¼ bid.

Overnight and early Wednesday morning, news broke that the company had hired M-III Partners as advisors in preparing a bankruptcy filing.

On Tuesday, the Hoffman Estates, Ill.-based department store chain added restructuring expert David Carr, CEO of restructuring advisor Drivetrain, to its board of directors.

The company’s 6 5/8% notes that are coming due next Monday lost 43½ points, trading at 44½ bid.

Recently, chief executive officer Eddie Lampert submitted a restructuring proposal to the board of directors that would reduce the company’s debt by $1.1 billion.

“Lampert’s been trying to do this on his own, but it doesn’t look like it’s going to work,” a trader said. “I’d be surprised if they don’t file by this time next week.”

The news sparked lower trading elsewhere in the sector.

Competing Plano, Texas-based department store chain J.C. Penney saw its 8 5/8% notes due 2025 lose ¾ point to close at 67¼ bid.

Dallas-based luxury retailer Neiman Marcus’ 7 1/8% paper due 2028 shaved off 2½ points to close at 79½ bid. The 8% paper due 2021, while seeing modest improvement in intraday trading, settled back down to previous levels at 63½ bid.

Energy weaker

Oil and gas names fit into the broad negative trend in Wednesday activity, market sources said.

Houston-based independent producer Sanchez Energy’s bellwether 6 1/8% notes due 2023 lost 1 point to close at 57 bid.

Los Angeles-based peer California Resources’ issues were mixed.

The 6% notes due 2024, while moving as high as 88½ bid during the day, traded back to Tuesday’s level of 88 bid. The 8% notes due 2022 picked up 1½ points to close at around 98 bid.

Elsewhere, Sable Permian, another Houston-based producer, saw its paper drop.

The 7 1/8% notes due 2020 lost 7¼ points to close at 61¼ bid.

“Most of the oil stuff was a bit rattled,” a trader said. “But it could’ve been worse. The hurricane’s not going to hit the refining in the Gulf Coast.”

Oil futures continued to contract on supply worries on Wednesday, market sources said. West Texas Intermediate crude futures lost $1.79 during the session to end at $73.17 per barrel. North Sea Brent crude traded down $1.90, settling at $83.10 per barrel.

In the coal space, Englewood, Colo.-based bankrupt coal producer Westmoreland’s notes declined.

The 8¾% notes due 2022 fell ½ point to close at 27½ bid.

The company filed for bankruptcy on Tuesday to implement a restructuring support agreement reached with an informal group of lenders.

The parties to the support agreement hold 76.1% of the company’s term loan, 57.9% of its senior secured notes and 79.1% of its bridge loan, Prospect News reported.

Ferrellgas rises

Elsewhere, in the natural gas sector, FerrellGas’ notes improved, traders said.

The 6½% notes due 2021 added 2¼ points to close at 88½ bid. The 6¾% notes due 2022 also rose 2¼ points to close at 86¾ bid.

“Those bonds have been moving higher since last week,” a trader said. “There’s no news behind it, but it’s getting more attention day by day.”

While the Overland Park, Kan.-based propane supplier has seen notes trade higher recently, they have been hitting year-to-date lows after reporting a 63 cents per share loss in its Sept. 27 earnings report against analyst expectations of a 41 cents per share loss.

Wind Tre lower

Wind Tre’s notes moved lower, market sources said.

The 5% paper due 2026 lost ¼ point to close at 85½ bid.

Toward the close, the Milan-based fixed and mobile telecom services provider received a ratings upgrade. Fitch Ratings upgraded the company’s long-term issuer default rating and affirmed a stable outlook.

The upgrade was triggered by CK Hutchinson Holdings Ltd. purchasing an additional 50% stake in the company in June, making it the sole owner.

© 2015 Prospect News.
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