Rite Aid rises amid earnings loss, new partnership; Envision snaps negative streak

By James McCandless

San Antonio, June 27 – The distressed debt space saw a shift in attention to retail and healthcare names on Thursday.

Rite Aid Corp.’s notes rose after the company announced a partnership with Amazon.com, Inc. despite reporting an earnings loss.

Retail sector peer PetSmart, Inc.’s issues finished mixed.

Meanwhile, in health care, Envision Healthcare Corp.’s paper improved, snapping a weeks-long negative streak under the weight of a potential regulatory change.

In energy, Ensco Rowan plc’s notes ended mixed a day after receiving outsized attention in part due to favorable conditions for its sector.

Despite modest oil future gains, Chesapeake Energy Corp.’s and Alta Mesa Resources, Inc.’s issues slid while California Resources Corp.’s paper was mixed.

Elsewhere, in telecom, Frontier Communications Corp.’s notes fell while Intelsat SA’s issues experienced mixed results.

Rite Aid rises, PetSmart mixed

Retailer Rite Aid’s notes rose in the Thursday session, traders said.

The 7.7% senior unsecured debenture due 2027 gained 1¾ points to close at 59¼ bid.

After the close on Wednesday, the Camp Hill, Penn.-based drugstore chain released its first-quarter earnings results.

The company showed a 14 cents per share loss, missing analyst estimates of a 2 cents per share profit.

Revenues, pegged at $5.3 billion, were also disappointing.

“That really lowered expectations pre-market,” a trader said. “That alone would have led to the reverse of what ended up happening.”

Overnight, the company announced a new partnership with e-commerce giant Amazon.

The arrangement would see 100 Amazon pickup counters installed in Rite Aid stores with a planned expansion to more than 1,500 stores by the end of the year.

“You definitely can’t beat them, so you almost have to join,” the trader said.

Phoenix-based sector peer PetSmart’s issues finished mixed.

The 8 7/8% senior unsecured notes due 2025 picked up ½ point to close at 94¼ bid. The 5 7/8% notes due 2025 shaved off ½ point to close at 95½ bid.

Envision up

Meanwhile, in the health care space, Envision’s paper improved, market sources said.

The 8¾% senior unsecured paper due 2026 added 4½ points to close at 69½ bid.

The Nashville-based medical outsourcing name’s paper has seen a consistent drop since the end of April, when it was trading in the 90’s context.

The paper entered the mid-60’s this week.

The pressure has come from the United States Congress’ expressed intention to rein in the practice of balance billing or “surprise billing,” which bills patients who have unknowingly received medical services from providers outside of their insurance network.

“They provide a lot of staff for emergency rooms, which seems to lead to balance billing the most,” a trader said. “It would be difficult to adapt to if a bill were passed.”

Ensco Rowan mixed

Oil and gas name Ensco Rowan’s notes were mixed, traders said.

The 5.2% senior unsecured notes due 2025 shaved off ¼ point to close at 73¼ bid. The 7¾% notes due 2026 gained 2½ points to close at 77 bid.

The London-based contract driller was propelled on Wednesday by a combination of shooting oil prices and recognition of increasingly favorable conditions in the oil drilling sector.

“The cycle is now favorable for them,” a trader said. “I think the second half of this year is going to be pretty beneficial for drilling.”

The company also began a cash tender offer for up to $600 million in seven series of notes on Wednesday.

Oil names slide

Elsewhere in the sector, modest oil gains were not reflected in popular tranches, market sources said.

Oklahoma City, Okla.-based independent oil and gas producer Chesapeake Energy’s issues slid.

The 8% senior unsecured notes due 2027 slipped 1½ points to close at 88½ bid.

Houston-based sector peer Alta Mesa’s paper was also under water.

The 7 7/8% senior unsecured paper due 2024 lost ½ point to close at 38½ bid.

Los Angeles-based producer California Resources’ notes varied in direction.

The 6% senior unsecured notes due 2024 lopped off 1 point to close at 61 bid. The 8% notes due 2022 gained 1½ points to close at 76 bid.

West Texas Intermediate crude oil futures for August delivery edged up 5 cents to end the session at $59.43 per barrel.

North Sea Brent crude oil futures for August delivery finished at $66.55 per barrel after a 6-cent pickup.

Frontier falls, Intelsat mixed

In telecom, Frontier’s issues were falling, traders said.

The 10½% senior unsecured notes due 2022 gave back ½ point to close at 67 bid. The 11% notes due 2025 lost ¼ point to close at 61½ bid.

The Norwalk, Conn.-based wireline communications company is currently considering its financial options as it faces an approaching maturity wall in 2022.

While some are pushing for bankruptcy, Aurelius Capital Management is urging the company to handle the issue in an exchange out of court.

Luxembourg-based satellite operator Intelsat’s paper was mixed.

Intelsat Jackson Holdings SA’s 5½% senior unsecured paper due 2023 held level at 91½ bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 picked up 2½ points to close at 79¼ bid.

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