PetSmart improves on Chewy valuation; Teva loses on analyst scrutiny

By James McCandless

San Antonio, May 30 – The distressed market was largely mixed for much of the session with retailers and telecom at the forefront.

PetSmart, Inc.’s notes improved after an analyst predicted that e-commerce segment Chewy.com could be valued at $10 to $16 billion in an upcoming IPO.

Sector peer Bed Bath & Beyond, Inc.’s issues fell a day after striking a deal with a group of activist investors over governance.

Drugmaker Teva Pharmaceutical Industries Ltd.’s paper was losing as another analyst weighed in on its potential legal liabilities.

Meanwhile, in telecom, Frontier Communications Corp.’s notes finished mixed after news of an asset sale on Wednesday.

Elsewhere in the space, Intelsat SA’s issues were also mixed.

As oil futures took a dive, California Resources Corp.’s paper followed suit while Ensco Rowan plc’s and Weatherford International plc’s notes were mixed.

In computing, Rackspace Hosting, Inc.’s issues ended better.

PetSmart improves, BB&B mixed

PetSmart’s notes improved in the Thursday session, traders said.

The 8 7/8% notes due 2025 gained 3 points to close at 91¼ bid. The 5 7/8% notes due 2025 added 2½ points to close at 93¼ bid.

On Thursday, the Phoenix-based pet supplies retailer’s structure received a boost after a Bloomberg Intelligence analyst wrote that its e-commerce arm Chewy.com could be worth $10 to $16 billion.

The analysis, based on recent sales growth, comes as the company prepares Chewy for an initial public offering.

“This is good news for them,” a trader said. “But it’s not exactly clear if that number will hold when we get closer to the IPO.”

Union, N.J.-based sector peer Bed Bath & Beyond’s issues fell.

The 4.915% notes due 2034 dropped ½ point to close at 74¾ bid. The 3.749% notes due 2024 lost 2¼ points to close at 92½ bid.

The company announced on Wednesday that it had struck a deal with a group of activist investors to support its choices for new board members in exchange for setting up a committee to consider asset sales.

Teva loses

Drugmaker Teva’s paper spent the day moving downward, market sources said.

The 3.15% paper due 2026 shaved off ¾ point to close at 76½ bid. The 4.1% paper due 2046 traded down 1¼ points to close at 65½ bid.

The Petach Tikva, Israel-based drug manufacturer has seen an increase in scrutiny this week after announcing that it had settled a lawsuit with the state of Oklahoma for $85 million over the exponential availability of opioid drugs.

On Wednesday and Thursday, two analysts wrote that unless the company could win in upcoming potential litigation outright, the costs of losing or settling would run into the billions.

“It’s all about what you can afford,” a trader said. “The question is, how much can they shell out for the same thing over and over again?”

Frontier, Intelsat mixed

Meanwhile, in telecom, Frontier’s notes closed mixed, traders said.

The 10½% notes due 2022 rose 1¼ points to close at 73½ bid. The 11% notes due 2025 gave back 1 point to close at 64 bid.

The 10½% notes picked up 3¾ points on Wednesday.

The Norwalk, Conn.-based wireline communications name announced on Wednesday that it plans to sell $1.35 billion in assets and operations in Washington, Oregon, Idaho and Montana to WaveDivision Capital and Searchlight Capital Partners.

In a statement, the company said it would use the proceeds for debt reduction.

Luxembourg-based sector peer Intelsat’s issues also finished mixed.

Intelsat Jackson Holdings SA’s 5½% notes due 2023 added ¼ point to close at 90 bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 dropped ½ point to close at 74 bid.

Oil futures fall

As oil futures spend another day falling, distressed energy names trended the same way, market sources said.

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

The 8% notes due 2022 lost 3½ points to close at 73½ bid.

London-based contract driller Ensco’s notes were mixed.

The 5.2% notes due 2025, while moving up to 71½ bid during the session, ended level at 71 bid. The 7¾% notes due 2026 shaved off ¾ point to close at 76 bid.

Baar, Switzerland-based oilfield services provider Weatherford’s issues also varied in direction.

The 8¼% notes due 2023 declined by ½ point to close at 52½ bid. The 9 7/8% notes due 2024 gained ¼ point to close at 51¼ bid.

Rackspace better

Software company Rackspace’s paper ended the day better, traders said.

The 8 5/8% notes due 2024 tacked on 1 point to close at 88½ bid.

The San Antonio-based cloud computing name saw increased attention on Thursday as the private company reports first-quarter earnings.

“There was a conference call today and people seemed happy with the results,” a trader said. “More should trickle out soon.”

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