Rite Aid gains amid tightening sector; PG&E rises as bonuses approved

By James McCandless

San Antonio, April 24 – The distressed space engaged in a broad positive shift in the Wednesday session.

Rite Aid Corp.’s notes were gaining amid a tightening sector and policy changes as it tries to stay afloat.

Despite increased attention, L Brands, Inc.’s issues finished the session level.

In utilities, PG&E Corp.’s paper was on the rise after it received court approval for an employee bonus plan.

Manufacturer Adient plc’s notes saw a boost as a subsidiary talked about pricing a $750 million offering of seven-year senior secured notes to yield in the 7 1/8% area.

Elsewhere, Mallinckrodt plc’s issues were better despite a ratings downgrade.

In oil services, Bristow Group Inc.’s paper was positive again despite the likelihood of a bankruptcy filing next month.

Mixed oil futures led to similar movements for California Resources Corp.’s and Weatherford International plc’s notes while Halcon Resources Corp.’s issues improved.

Rite Aid gains, L Brands flat

In retail, Rite Aid’s notes were seen gaining in the Wednesday session, traders said.

The 6 1/8% notes due 2023 picked up 1 point to close at 84½ bid. The 7.7% notes due 2027 added ¾ point to close at 59¾ bid.

By the close, the 6 1/8% notes saw $23 million of notes change hands.

After the close on Tuesday, the Camp Hill, Penn.-based drug store retailer announced that it would set the minimum age for purchasing tobacco products at 21, following competitor Walgreens announcement of a similar policy on Tuesday.

The company’s structure has been under pressure since Walgreens said that it would be lowering its guidance amid weakness in the sector.

“The news isn’t all that’s driving it,” a trader said. “It’s been increasingly topical over the last few months.”

Elsewhere in the retail space, Columbus, Ohio-based sector peer L Brands’ issues were relatively active but flat.

The 6¾% notes due 2036, while moving as high as 87½ bid during the day, closed level at 86½ bid. The 5¼% notes due 2028, reaching a ceiling at 91 bid, fell back down to 89 bid.

PG&E rises

Elsewhere, in utilities, PG&E’s paper was on the rise, market sources said.

The 4.3% paper due 2045 improved by 1 point to close at 90½ bid. The 4% paper due 2046 gained 1¾ points to close at 86¾ bid.

Late Tuesday, the San Francisco-based bankrupt electric utility won approval for its $350 million employee bonus plan in bankruptcy court.

The company said that the plan was necessary in order to better enact its wildfire prevention plan, also promoting stability in its workforce.

There was also speculation surrounding the name early Wednesday after a report suggested that Warren Buffett’s Berkshire Hathaway was considering buying the company.

The company later said that the report was inaccurate.

“That gave it a lot of juice in the day’s activity,” a trader said.

Adient up

Meanwhile, auto name Adient’s notes saw a boost, traders said.

The 4 7/8% notes due 2026 edged up ¼ point to close at 81¾ bid.

On Wednesday morning, a subsidiary of the Dublin-based automotive parts manufacturer talked a $750 million offering of seven-year senior secured notes to yield in the 7 1/8% area, Prospect News reported.

The subsidiary intends to use the proceeds, together with new bank debt, to repay debt under its existing credit agreement in full and for general corporate purposes.

By the afternoon, the company lowered pricing on the concurrent new bank debt, its $750 million five-year covenant-lite term loan B, to Libor plus 425 basis points from Libor plus 450 bps.

Mallinckrodt better

In the health care space, Mallinckrodt’s issues were better, market sources said.

The 4¾% notes due 2023 rose ½ point to close at 76½ bid.

Moody’s Investors Service lowered the corporate family rating, probability of default rating and issue-level ratings on a subsidiary of the Staines-Upon-Thames, U.K.-based pharmaceuticals name.

The agency reaffirmed a negative outlook.

Bristow positive

Energy services name Bristow’s paper was positive, traders said.

The 6¼% paper due 2022 added ½ point to close at 20¾ point.

On Tuesday, the 6¼% paper gained 2 points.

The Houston-based helicopter name has been positive while it is widely expected that the name will file for bankruptcy after its default waivers expire next month.

Oil mixed

Mixed oil futures created a similar atmosphere for distressed oil tranches, market sources said.

Los Angeles-based independent oil and gas producer California Resources’ notes were similarly mixed.

The 6% notes due 2024 shaved off ½ point to close at 70 bid. The 8% notes due 2022 picked up 2 points to close at 85¼ bid.

Baar, Switzerland-based oilfield services name Weatherford’s issues were also mixed.

The 8¼% notes due 2023 held level at 68¾ bid. The 9 7/8% notes due 2024 garnered 1 point to close at 71½ bid.

Houston-based producer Halcon Resources’ paper improved.

The 6¾% paper due 2025 added 1½ points to close at 69 bid.

West Texas Intermediate crude oil futures for June delivery shaved off 41 cents to end the session at $65.89 per barrel.

North Sea Brent crude oil futures for June delivery closed at $74.57 per barrel after a 6-cent rise.

© 2015 Prospect News.
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