PetSmart mixed amid friction with creditor; FirstEnergy Solutions mixed after deal rejected

By James McCandless

San Antonio, April 5 – The end of the week in the distressed debt market saw more emphasis on newsmakers, many of which saw nonuniform trading.

PetSmart, Inc.’s notes finished the week mixed as a major creditor looks to assume plaintiff status in an ongoing lawsuit against the name.

Sector peer L Brands, Inc.’s issues also finished the session mixed.

Meanwhile, utility name FirstEnergy Solutions Corp., a subsidiary of FirstEnergy Corp., saw its paper end mixed after its restructuring plan was tossed out of court.

Elsewhere in utilities, PG&E Corp.’s notes were lower a day after it appointed a new chief executive officer and 10 new board members.

In oil and gas, Weatherford International plc’s issues continued to slide as it tries to maintain its New York Stock Exchange listing.

Oil future gains were the backdrop of varying results for California Resources Corp.’s paper while Hi-Crush Partners LP’s notes dipped and Chaparral Energy, Inc.’s issues pushed up.

Trading on Intelsat SA’s paper varied in the telecom space.

PetSmart, L Brands mixed

Retailer PetSmart’s notes closed out the week mixed, traders said.

The 8 7/8% notes due 2025 lost ½ point to close at 77½ bid. The 5 7/8% notes due 2025 picked up 1 point to close at 87 bid.

A day after receiving a majority of its creditor’s support for a loan amendment that was aimed, in part, at halting ongoing litigation, the Phoenix-based pet supply chain could face more legal strife if a large bondholder gets its way.

Capital Research, which owns $600 million of the company’s bonds, wants to assume the plaintiff mantle in a lawsuit against the company over the 2018 private equity transfer of a large portion of e-commerce arm Chewy.com.

The fund will continue the argument that the company was insolvent at the time of the transfer.

“PetSmart got a majority, but it was pretty slim,” a trader said. “They should’ve worked out something that would get more support.”

Columbus, Ohio-based sector peer L Brands’ issues were similarly mixed.

The 6¾% notes due 2036 added 1¼ points to close at 86 bid. The 5¼% notes due 2028, while reaching 91½ bid during the day, closed level at 89 bid.

FirstEnergy mixed

Meanwhile, in utilities, FirstEnergy Solutions’ paper also finished the day mixed, market sources said.

The 6.05% paper due 2021 picked up 1½ points to close at 87 bid. The 6.8% paper due 2039 closed flat at 85½ bid.

Late on Thursday, the subsidiary of Akron, Ohio-based utilities name FirstEnergy had its restructuring deal rejected in bankruptcy court.

The deal would have turned over the business to creditors, cutting ties with the parent company.

A bankruptcy judge said that the plan would unfairly protect the name from lawsuits over environmental claims.

The company filed for bankruptcy in March 2018.

PG&E lower

Elsewhere in the sector, PG&E’s notes were pushed lower, traders said.

The 3¾% notes due 2042 shaved off ¼ point to close at 78½ bid.

The San Francisco-based bankrupt electric utility’s structure has seen heightened activity this week after announcing the appointment of a new CEO and 10 new board members on Wednesday.

California officials expressed concerns about new CEO William Johnson and his experience related to the job.

“Exiting bankruptcy is the name of the game,” a trader said. “Everything else can be worked out along the way.”

Weatherford slides

In the oil and gas space, Weatherford’s issues were negative, market sources said.

The 5 1/8% notes due 2020 declined by ¼ point to close at 81 bid. The 8¼% notes due 2023 dropped 1½ points to close at 67 bid.

The Baar, Switzerland-based oilfield services provider’s structure was pushed further into distressed territory as it addresses worries from investors and the market overall.

Skittish oil prices and an ongoing effort to maintain NYSE compliance have put added pressure on the name.

To regain compliance, the company is seeking a 1-to-20 reverse stock split, pending shareholder approval.

Oil names vary

Despite gains to close the week for oil futures, distressed oil tranches varied in direction, traders said.

Los Angeles-based independent oil and gas producer California Resources’ paper was mixed.

The 6% paper due 2024 lost ½ point to close at 71 bid. The 8% paper due 2022 rose 1 point to close at 82 bid.

Houston-based energy logistics name Hi-Crush’s notes fell.

The 9½% notes due 2026 shed ¼ point to close at 78 ½ bid.

Houston-based producer Chaparral’s issues pushed upward.

The 8¾% notes due 2023 gained 1¾ points to close at 72½ bid.

West Texas Intermediate crude oil futures for May delivery added 98 cents to close at $63.08 per barrel at the Friday close.

North Sea Brent crude oil futures for June delivery ended the day at $70.34 per barrel after a 94-cent gain.

Intelsat mixed

In telecom, Intelsat’s paper also ended the week mixed, market sources said.

Intelsat Jackson Holdings SA’s 5½% paper due 2023 tacked on ½ point to close at 90½ bid. Intelsat (Luxembourg) SA’s 8 1/8% paper due 2023 fell 1 point to close at 76¼ bid.

After weathering a tumultuous few weeks, the Luxembourg-based satellite operator’s structure spent the week on a positive trend after a JPMorgan analyst issued an upgrade.

The company’s troubles stemmed from uncertainty over the control of access and potential revenues generated from the use of the C-band spectrum.

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