PetSmart rises amid e-commerce IPO news; McDermott moves up as earnings released

By James McCandless

San Antonio, April 29 – Retail and oil names continued to see much of the distressed debt space’s attention at the start of a new week.

PetSmart, Inc.’s notes shot up after news broke that the company had started the process to take its e-commerce segment Chewy.com public.

Sector peer Neiman Marcus Group, Inc.’s issues were pushed in the opposite direction.

At the top of the energy space, McDermott International, Inc.’s paper was on the rise despite reporting an earnings loss.

Mixed oil futures served as the backdrop for losses for California Resources Corp., Halcon Resources Corp. and Chaparral Energy, Inc.’s notes.

Meanwhile, Adient plc’s issues trended lower as its newer issue continues to trade in the high-yield space.

In telecom, Frontier Communications Corp. and Intelsat SA’s paper declined.

PetSmart up, Neiman Marcus off

In the retail space, PetSmart’s notes were moving upward in the Monday session, traders said.

The 8 7/8% notes due 2025 jumped up 6½% points to close at 89½ bid. The 5 7/8% notes due 2025 added 3¼ points to close at 90½ bid.

The combined tranches saw $21 million changing hands.

On Monday, the Phoenix-based pet supplies chain announced that it has filed documents with the Securities and Exchange Commission to launch an initial public offering for its e-commerce segment Chewy.com.

The segment was the subject strife between the company and its creditors in recent months, with stakeholders asserting that a private equity transfer of a large portion of the segment was illegal.

Creditors had bogged the company down in litigation until last month when the company proposed loan amendments limiting PetSmart’s ability to add on new debt.

“The thing to remember here is that PetSmart is still going to own a lot of Chewy,” a trader said. “So the creditors are probably happy that they’re going to use those proceeds for debt reduction.”

Elsewhere in the sector, Dallas-based luxury retailer Neiman Marcus’ issues moved in the opposite direction.

The 8% notes due 2021 dropped 6 points to close at 57 bid.

McDermott rises

Meanwhile, in the oil and gas space, McDermott’s paper was on the rise, market sources said.

The 10 5/8% paper due 2024 added ¾ point to close at 92½ bid.

On Monday morning, the Houston-based oil and gas construction name released its first-quarter earnings report.

The company showed earnings at 2 cents per share where analysts expected 13 cents per share.

Its structure has been under pressure in the last few months as it warned of an impairment charge on a major LNG construction project it was building in Louisiana.

“It’s really bounced back,” a trader said. “It should move into safer territory if market conditions hold.”

Oil names lose

Mixed oil futures gave way for declines in distressed oil tranches, traders said.

Los Angeles-based independent oil and gas producer California Resources’ notes were on a negative trend.

The 8% notes due 2022 shaved off 1½ points to close at 77¼ bid.

Houston-based sector peer Halcon’s issues followed suit.

The 6¾% notes due 2025 lost ¼ point to close at 64¾ bid.

Oklahoma City, Okla.-based producer Chaparral’s paper were put on a similar path.

The 8¾% paper due 2023 fell 1 point to close at 74 bid.

West Texas Intermediate crude oil futures for June delivery rose 20 cents to finish the session at $63.50 per barrel.

North Sea Brent crude oil futures for June delivery ended at $72.04 per barrel after an 11 cent decline.

Adient declines

Elsewhere, Adient’s notes followed a negative trend, market sources said.

The 4 7/8% notes due 2026 lost ¼ point to close at 82 bid.

The Dublin-based car seat manufacturer’s structure has seen an increase in activity after a subsidiary’s $800 million issue of seven-year senior secured notes started trading on Friday.

Frontier, Intelsat down

In the telecom sector, Frontier’s issues were pushed lower in Monday activity, traders said.

The 10½% notes due 2022 declined by ¼ point to close at 72¾ bid. The 11% notes due 2025 also lost ¼ point to close at 64¾ bid.

Meanwhile, Luxembourg-based satellite operator Intelsat’s paper was also falling.

Intelsat Jackson Holdings SA’s 5½% paper due 2023 fell ¼ point to close at 90½ bid. Intelsat (Luxembourg) SA’s 8 1/8% paper due 2023 shed ¾ point to close at 77½ bid.

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