L Brands notes higher as new issue trades; GTT heads lower after ratings downgrade

By James McCandless

San Antonio, Sept. 17 – Heading into the back half of the week, the distressed debt market paid attention to the retail and telecom sectors.

L Brands, Inc.’s notes moved higher as the company sells a $1 billion offering of senior notes and kicks off a tender offer.

Sector peer Nordstrom, Inc.’s issues were seen varying.

Meanwhile, in the telecom space, GTT Communications, Inc.’s paper shifted lower after receiving a ratings downgrade.

The travel space saw American Airlines Group, Inc.’s notes gain while United Airlines Holdings, Inc.’s issues diverged as the White House signaled its support for more payroll aid.

A day of gains for oil futures translated to improvements for Occidental Petroleum Corp.’s and SM Energy Co.’s paper while Transocean Ltd.’s notes were mixed.

Elsewhere, manufacturing name Bombardier, Inc.’s issues pushed upward a day after announcing a purchase agreement for its rail unit.

L Brands higher

L Brands’ notes spent the day moving higher, traders said.

The 6¾% senior notes due 2036 picked up 2 points to close at 100¾ bid. The 5¼% senior notes due 2028 garnered ½ point to close at 97 bid.

Late in the day on Wednesday, the Columbus, Ohio-based specialty retailer sold an upsized $1 billion issue of 10-year senior notes at par to yield 6 5/8%.

The issue was upsized from an initial $750 million.

The company will use the proceeds to fund equally sized tender offers for its 5 5/8% senior notes due 2022, its 5 5/8% senior notes due 2023, its 7.6% senior notes due 2037 and its 6.95% exchange debentures due 2033.

Any of the leftover proceeds will be used to repay other outstanding debt.

The early tender deadline is 5 p.m. ET on Sept. 29, with the offer expiring at 11:59 p.m. ET on Oct. 14.

Seattle-based department store chain Nordstrom’s issues were seen varying.

The 5% senior notes due 2044 rose ½ point to close at 71¼ bid. The 7% senior notes due 2038 shed 1¾ points to close at 89½ bid.

GTT lower

Meanwhile, in the telecom space, GTT’s paper shifted lower, market sources said.

The 7 7/8% senior paper due declined by 1½ points to close at 52½ bid.

After the close on Wednesday, the McLean, Va.-based cloud networking services name received a ratings downgrade from Moody’s Investors Service.

The agency cut the company’s corporate family rating, probability of default rating, speculative grade liquidity rating and issue-level ratings.

Moody’s said that the cuts were in response to GTT’s announcement that it sees added material delays in the filing of its second-quarter earnings report, which have revealed accounting issues.

The company said if the issues weren’t resolved by debtholders then the result could be an imminent default.

On Tuesday, the company announced the departure of its top accountant.

“Confidence in GTT seems to be dropping at a rapid clip,” a trader said.

In after-market activity on Thursday, Fitch Ratings made similar downgrades.

Airlines push for aid

The travel space saw American Airlines’ notes gain, traders said.

The 5% senior notes due 2022 added 2¼ points to close at 72½ bid. The 11¾% senior notes due 2025 tacked on 1¾ points to close at 100¼ bid.

During a meeting with airline executives on Wednesday, which included the chief executive officer of the Fort Worth-based airline, White House chief of staff Mark Meadows said that president Donald Trump would support a bill to provide a second round of payroll aid to the industry.

While $25 billion was passed by Congress in March, Meadows indicated that another $25 billion is necessary to keep tens of thousands of employees working.

The company and several union leaders sent a letter to congressional leaders on Wednesday lobbying for the aid.

A bill approving the aid proposed by the Senate is tied up in negotiations.

While improving at a modest pace recently, demand for air travel has remained subdued since the onset of the coronavirus pandemic.

Chicago-based carrier United Airlines’ issues diverged.

The 5% senior notes due 2024 were docked 1½ points to close at 90 bid. The 4¼% senior notes due 2022 picked up ¾ point to close at 94¾ bid.

Oil gains

A day of gains for oil futures mostly translated to improving distressed energy tranches, market sources said.

West Texas Intermediate crude oil futures for October delivery moved up 81 cents to settle at $40.97 per barrel.

North Sea Brent crude oil futures for November delivery finished at $43.30 per barrel after a $1.08 bump.

Houston-based independent oil and gas producer Occidental Petroleum’s paper moved along similar lines.

The 2.9% senior notes due 2024 grabbed 1¼ points to close at 90 bid. The 2.7% senior paper due 2022 inched up ¼ point to close at 95½ bid.

Denver-based E&P SM Energy’s notes also picked up steam.

The 6 1/8% senior notes due 2022 shot up 3¼ points to close at 80¼ bid.

Steinhausen, Switzerland-based contract driller Transocean’s issues were mixed.

The 7½% senior notes due 2031 shaved off ¾ point to close at 15 bid. The 6.8% senior notes due 2038 rose ½ point to close at 16¼ bid.

Bombardier up

Elsewhere, manufacturer Bombardier’s paper pushed upward, traders said.

The 6% senior notes due 2022 improved by 1 point to close at 93½ bid. The 7 7/8% senior paper due 2027 gained 1½ points to close at 76 bid.

The Montreal-based airplane and railcar builder’s structure continued to see high levels of attention after announcing a finalized purchase agreement for its rail unit on Wednesday.

The company said that it will sell the segment to French peer Alstom for about $4 billion, which is $350 million less than what was expected.

After Bombardier released weak second-quarter earnings, Alstom said that those results would be taken into consideration as the deal was finalized.

Both parties expect the transaction to close in first-quarter 2021.

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