PetSmart up as Chewy valuation increases; Teva rises in pharma space

By James McCandless

San Antonio, June 4 – Tuesday’s distressed debt session saw attention paid to retail and pharmaceutical names.

PetSmart, Inc.’s notes were moving higher after the company pegged the value of e-commerce segment Chewy.com at $7 billion before an initial public offering.

Sector peer Neiman Marcus Group, Inc.’s issues were also improving.

Drugmaker Teva Pharmaceutical Industries Ltd.’s paper was on the rise as the market weighs its future liabilities as Mallinckrodt plc’s notes also gained.

Meanwhile, in shipping, Navios Maritime Holdings Inc.’s issues were on the rise after a subsidiary started a senior secured notes offering.

As oil futures improved, Comstock Resources, Inc.’s paper declined, Ensco Rowan plc’s notes rose and Denbury Resources, Inc.’s issues finished mixed.

Telecom name Frontier Communications Corp.’s paper ended the day better.

PetSmart higher

Retailer PetSmart’s notes were moving higher on Tuesday, traders said.

The 8 7/8% notes due 2025 added 1 point to close at 95 bid. The 5 7/8% notes due 2025 rose ¼ point to close at 94¾ bid.

On Monday, the Phoenix-based pet supplies retailer told the Securities and Exchange Commission in a filing that it values e-commerce arm Chewy.com at $7 billion.

The valuation comes as the company prepares to take Chewy public, setting a price range of $17 to $19 on 41.6 million shares.

The company stands to make about $90 million after fees.

Its structure languished in distressed territory over the last year as it became involved in a prolonged dispute with creditors over the site.

After the company transferred a large portion of Chewy into private equity, creditors sued.

“It looks like it’s ending well for everyone,” a trader said.

Neiman Marcus improves

Sector peer Neiman Marcus’ issues were also improving, market sources said.

The new 8% notes due 2024 picked up 3½ points to close at 91 bid.

The Dallas-based luxury department store’s new notes began trading on Monday at 97 bid, quickly falling into the 80’s context before seeing a partial recovery on Tuesday.

The new notes were part of a larger exchange that it agreed to with creditors in order to extend the maturities of its existing debt.

“It might straddle 90 for the rest of the week,” a trader said. “But it doesn’t bode well for it to fall that far that fast.”

Teva, Mallinckrodt gains

Meanwhile, in the pharma space, Teva’s paper was on the rise, traders said.

The 3.15% paper due 2026 gained 1½ points to close at 79¼ bid. The 4.1% paper due 2046 added 1¼ points to close at 67½ bid.

The Petach Tikva, Israel-based drugmaker’s structure has been under pressure after the company settled an opioid-related lawsuit for $85 million.

The move set off a flurry of activity, with analysts giving their perspectives on how much the company could be liable for in potential litigation.

“Nobody really knows how much they’d be on the hook for, but they can’t let that kind of thing pile up,” a trader said.

Staines-upon-Thames, England-based peer Mallinckrodt’s notes were also gaining.

Navios better

Elsewhere, shipper Navios’ issues were moving better, market sources said.

The 7 3/8% notes due 2022 garnered 1 point to close at 66¼ bid. The 11¼% notes due 2022 jumped up 3½ points to close at 71¼ bid.

On Tuesday, a South American subsidiary of the Monaco-based shipping company started an offering of senior secured notes with a yield in the 7% area, Prospect News reported.

Corporacion Navios is a unit of Navios South American Logistics.

Oil futures up

Oil futures saw gains Tuesday, though distressed tranches were not as uniform, traders said.

Frisco, Texas-based independent oil and gas producer Comstock’s paper traded down.

The 9¾% notes due 2026 shaved off 2¼ points to close at 73½ bid.

London-based contract driller Ensco’s notes were on a positive track.

The 5.2% notes due 2025 improved by ¾ point to close at 69¾ bid. The 7¾% notes due 2026 added ¾ point to close at 75½ bid.

Houston-based sector peer Denbury’s issues finished mixed.

The 6 3/8% notes due 2021, while being bumped up to 86 bid during the session, fell back to close level at 84 bid. The 5½% notes due 2022 dropped 3 points to close at 70½ bid.

West Texas Intermediate crude oil futures for July delivery added 23 cents to close the day at $53.48 per barrel.

North Sea Brent crude oil futures for August delivery finished the afternoon at $61.97 per barrel after a 69-cent rise.

Frontier better

Telecom name Frontier’s paper finished the session better, market sources said.

The 10½% paper due 2022 moved up 1½ points to close at 73 bid. The 11% paper due 2025 rose 1 point to close at 63¾ bid.

The Norwalk, Conn.-based wireline communications name recently announced the $1.3 billion sale of operations and assets in four states.

“The name of the game is debt reduction,” a trader said. “And they’ve still got a lot ahead of them.”

© 2015 Prospect News.
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