Rite Aid notes higher after earnings beat; Antero Resources eyed as new notes offered

By James McCandless

San Antonio, Dec. 17 – The distressed debt market opened the back half of the week with retail and energy names in focus.

Rite Aid Corp.’s notes pushed higher after the company beat its earnings expectations for the third quarter.

Sector peer PetSmart, Inc.’s issues varied in direction.

In the energy space, Antero Resources Corp.’s paper diverged as the company offered and sold a $500 million tranche of senior notes.

Contract driller Transocean Ltd.’s notes improved after a federal judge upheld the company’s restructuring plan against a default claim.

With oil futures gaining in the backdrop, Occidental Petroleum Corp.’s issues followed while Superior Energy Services, Inc.’s paper was mixed.

Elsewhere, United Airlines Holdings, Inc.’s notes were active but flat while American Airlines Group Inc.’s issues lifted amid reports of new stimulus.

Theater operator AMC Entertainment Holdings, Inc.’s paper moved in opposite directions in the wake of a ratings downgrade.

Rite Aid improves

Rite Aid’s notes pushed higher in the Thursday session, traders said.

The 7.7% senior debentures due 2027 shifted up 3 points to close at 98 bid. The 8% notes due 2026 grabbed 2 points to close at 107½ bid.

Before the market opened on Thursday, the Camp Hill, Pa.-based drug store chain released its earnings results for the third quarter.

The company reported an earnings per share profit of 40 cents, outpacing analyst expectations of a 1 cent per share loss.

Revenues were posted as $6.12 billion, also higher than predictions and representing a 12% increase from the previous year.

Rite Aid also raised its guidance for the 2021 fiscal year, projecting revenues of between $23.9 billion and $24.2 billion.

During the last quarter, the company repaid more than $300 million of debt and plans to use its strong liquidity position to improve its leverage ratio further from its current 5.97x, Prospect News reported.

“They have been well positioned this year for the pandemic,” a trader said. “The whole structure has benefited.”

Phoenix-based pet supplies retailer PetSmart’s issues varied in direction.

The 8 7/8% senior notes due 2025 held level to close at 102¾ bid. The 5 7/8% senior notes due 2025 lost ¼ point to close at 102½ bid.

Antero diverges

In the energy space, Antero Resources’ paper diverged, market sources said.

The 5 1/8% senior notes due 2022 grabbed 1¾ points to close at 96¾ bid. The 5% senior notes due 2025 shaved off ½ point to close at 91¼ bid.

On Thursday morning, the Denver-based independent oil and gas producer announced plans to price a $500 million offering of senior notes due 2026.

After some anticipation, the company priced the new tranche at par to yield 8 3/8% after the market closed.

The yield came in at the tight end of yield talk in the 8½% area.

With the proceeds from the offering, the company plans to redeem $350 million of the 5 1/8% notes.

Transocean up

Drilling name Transocean’s notes improved, traders said.

The 7½% senior notes due 2031 added 2¾ points to close at 35½ bid. The 7½% senior notes due 2026 picked up 2 points to close at 45¾ bid.

A federal judge ruled in the Steinhausen, Switzerland-based contract driller’s favor on Thursday, upholding its $1.5 billion debt restructuring plan.

The company’s creditors had brought the suit, alleging that it was in default after a recently completed 11-series tender offer.

The stakeholders claimed that Transocean finished the process by pledging assets that were already promised to Whitebox Advisors and Pimco.

While the group gave Transocean until Dec. 1 to resolve the allegation or face accelerated bond repayments and forced bankruptcy, the judge ruled that there was no default.

Oil gains

With oil futures gaining in the backdrop, distressed energy tranches largely followed, market sources said.

West Texas Intermediate crude oil futures for February delivery moved up 54 cents to settle at $48.54 per barrel.

North Sea Brent crude oil futures for February delivery finished the session at $51.50 per barrel after a 50 cent boost.

Houston-based producer Occidental Petroleum’s issues mirrored the movements of futures.

The 2.9% senior notes due 2024 tacked on ¼ point to close at 96½ bid. The 2.7% senior notes due 2024 garnered 1 point to close at 101¼ bid.

Houston-based oilfield services name Superior Energy’s paper was mixed.

The 7 1/8% senior notes due 2021 rose 2 points to close at 32 bid. The 7¾% senior notes due 2024 gave back ¼ point to close at 31½ bid.

Airlines eyed

Elsewhere, air travel name United Airlines’ notes were active but ultimately unchanged, traders said.

The 5% senior notes due 2024, while slipping to 99 bid during the day, ended level at 100 bid. The 4¼% senior notes due 2022 closed flat at 100¼ bid.

According to reports from the last 24 hours, the Chicago-based airline and others in the industry are slated to receive federal assistance to the tune of $17 billion as stimulus negotiations appear to be concluding.

Since the first round of $25 billion in aid expired in September, airlines have furloughed thousands of employees, waiting for Congress to pass another round.

On Wednesday, the company was given a double downgrade by an analyst at JPMorgan.

The analyst downgraded the company’s common stock to underweight from overweight.

Fort Worth-based air carrier American Airlines’ issues were lifted.

The 5% senior notes due 2022 rose ¾ point to close at 89¾ bid. The 11¾% senior notes due 2025 added 1¼ points to close at 115¾ bid.

AMC trades mixed

Theater operator AMC’s paper moved in opposite directions, market sources said.

The 12% notes due 2026 picked up ¾ point to close at 23½ bid. The 6 1/8% senior subordinated notes due 2027 shed ½ point to close at 13½ bid.

During Wednesday’s activity, S&P Global Ratings gave a ratings downgrade to the Leawood, Kan.-based movie theater name.

The agency slashed the company’s rating to CC from CCC- and put a C rating on AMC’s $100 million of second-lien notes on CreditWatch with negative implications.

The cut was in reaction to AMC’s recent deal to exchange $100 million of its existing second-lien notes for equity and provide it with $100 million of new first-lien 15%/17% payment-in-kind toggle notes.

The exchange is viewed by S&P as distressed and tantamount to a default.

© 2015 Prospect News.
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