Rite Aid better on earnings report; Halcon Resources lower after bankruptcy exit news

By James McCandless

San Antonio, Sept. 26 – Thursday trading in the distressed debt market largely depended on individual news-making names, with a heavy showing by energy tranches.

Rite Aid Corp.’s notes performed better after the company released better-than-expected second-quarter earnings.

Sector peer L Brands, Inc.’s issues varied in direction.

In energy, Halcon Resources Corp.’s paper declined after the company said that it expects to exit bankruptcy within the next few weeks.

In a diverging day for oil futures, McDermott International, Inc.’s notes rose while Chesapeake Energy Corp.’s and Diamond Offshore Drilling, Inc.’s issues trailed.

Dairy name Dean Foods Co.’s paper saw a recovery after previously declining on news that its chief financial officer had resigned.

With the space active as ever, drug makers Teva Pharmaceutical Industries Ltd.’s and Mallinckrodt plc’s notes saw mixed movements.

Rite Aid better

Rite Aid’s notes were seen performing better on Thursday, traders said.

The 6 1/8% senior notes due 2023 rose 1½ points to close at 81½ bid. The 7.7% senior notes due 2027 gained 3¾ points to close at 53¾ bid.

Early Thursday, the Camp Hill, Pa.-based drug store chain released better-than-expected second-quarter earnings results.

The company reported a 12 cents per share profit, better than the 8 cents per share profit expected by analysts.

Revenues were just under predictions at $5.37 billion.

The name’s structure has seen turmoil over the last year, experiencing rocky quarters and a change in the chief executive officer position.

“They can put out good numbers but they have to do it consistently,” a trader said. “That’s been one of their biggest problems.

Columbus, Ohio-based retailer L Brands’ issues varied in direction.

The 6¾% senior notes due 2036 fell 2 points to close at 85 bid. The 5¼% senior notes due 2028 picked up ¼ point to close at 93 bid.

Halcon declines

Meanwhile, in energy, Halcon’s paper was in decline, market sources said.

The 6¾% senior notes due 2025 shaved off ½ point to close at 9½ bid.

The Houston-based independent oil and gas producer announced on Thursday that it expects to exit bankruptcy within the next few weeks, Prospect News reported.

Last month, the company filed for Chapter 11 bankruptcy with about $945 million in debt on its books.

The company said that its reorganization plan, approved by a bankruptcy court this week, eliminates more than $750 million in debt and more than $40 million of annual interest expense and provides for a new $750 million senior secured revolving credit facility.

The initial borrowing base of the new facility will be $275 million after it emerges.

Oil names diverge

With non-cohesive movements from oil futures, distressed energy names also diverged, traders said.

West Texas Intermediate crude oil futures for November delivery chipped off 8 cents to settle at $56.41 per barrel.

North Sea Brent crude oil futures for November delivery finished at $62.74 per barrel after a 35 cent gain.

Houston-based oil and gas engineering name McDermott’s notes rose.

The 10 5/8% senior notes due 2024 added 2¾ points to close at 28¾ bid.

Oklahoma City-based oil and gas producer Chesapeake Energy’s issues were seen trailing.

The 8% senior notes due 2025 dipped 2½ points to close at 76¾ bid. The 8% senior notes due 2027 declined by 2 points to close at 74¼ bid.

Houston-based contract driller Diamond Offshore’s paper also ended weaker.

The 7 7/8% senior paper due 2025 lost 2¼ points to close at 83½ bid.

Dean Foods better

Diary name Dean Foods’ notes saw a recovery, traders said.

The 6½% senior notes due 2023 shot up 2½ points to close at 51½ bid.

The notes recovered most of their 3 point Wednesday drop.

The Dallas-based dairy products producer’s notes were put under pressure on Wednesday after the company announced the resignation of CFO Jody Macedonio.

The news comes after a months-long strategic alternatives review where executives determined that the company could operate on its own without selling the company or major assets.

Teva, Mallinckrodt mixed

With the space as active as ever, drug name Teva’s issues were mixed, market sources said.

The 6¾% senior notes due 2028 tacked on 1 point to close at 84¼ bid. The 2.8% senior notes due 2023 dropped ½ point to close at 81 bid.

The Petach Tikva, Israel-based generic drug producer’s structure continues to be among the most heavily traded pharma names amid continuing turmoil over the sector’s role in the opioid epidemic.

The company and others face legal challenges that could result in hundreds of millions in settlement payouts.

Staines-upon-Thames, England-based sector peer Mallinckrodt’s paper also saw dissimilar movements.

The 5 5/8% senior paper due 2023 improved by ¾ point to close at 34 bid. The 5¾% senior paper due 2022 dropped 4½ points to close at 37½ bid.

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