Cengage Learning, McGraw movers of the day after results; Neiman suffers another loss; Murray pares gains

By Colin Hanner

Chicago, Feb. 8 – As focus shifted toward the ever-increasing amount of new issues hitting the high-yield market on Wednesday, an education company stole the session’s attention in the distressed market with a multi-point gain, traders said.

“There’s a bunch of new issues, so obviously a lot of focus on those,” a trader said.

Educational content, technology and services company Cengage Learning Inc. exceeded quarterly expectations, a reversal of what happened to fellow education publishing company Pearson plc, which fell dramatically last month after announcing it was cutting its profit forecast going forward.

A set of retailers – L Brands Inc. and Neiman Marcus Group, Inc. – traded mixed on the day in the ever-declining traditional retail landscape. News surrounding the latter may have come into play.

Intelsat Jackson Holdings SA continued to trend lower on the day, traders said, with two series of notes declining within a point from where they started.

A hospital operator and a pharmaceutical company were down on the session, private coal company Murray Energy Corp. lost the gains it had made in Tuesday’s session and California Resources Corp.’s most popular issue was down even though oil future prices were up on the day.

Cengage aces session

Arguably the most notable mover of the day was education publisher Cengage Learning, which defied quarterly earnings projections with the announcement of its third quarter results.

“There was concern about how weak their numbers would be, and I think they obviously exceeded people’s worst-case scenarios,” a trader said.

Its 9½% notes due 2024 were up “6 to 7” points to 89 7/8, a trader said, while another trader said they were trading in the 90 to 91 context.

A trader said the company talked about authorizing a buyback of debt in the open market, adding that that was what “probably what helped give the bonds a boost as well.”

Nearly a month ago, Cengage, along with McGraw Hill Education, tumbled in the bond market feeling a contagion effect after Pearson revised its outlook and announced disappointing quarterly earnings.

On Wednesday, the rising tide of Cengage lifted McGraw Hill “almost 5 points” in its 7 7/8% notes due 2024, which were up to 96¼, a trader said.

Retailers mixed on the day

For the second consecutive session, Neiman Marcus saw similar declines in its two sets of distressed notes.

“Neiman continues to be under pressure,” a trader said. “There continues to be a lot of weakness in retailers in general.”

For instance, Michael Kors Holdings Ltd. announced disappointing figures during Tuesday’s session, which brought down the company’s stock. The company cited “reduced traffic trends in shopping malls” as one of the headwinds the company will face going into the spring, according to a news release.

“Every time a retailer comes out with poor numbers, maybe it continues to have pressure on the whole sector. It’s one [company] after the other.”

And, of course, the geopolitical atmosphere may have something to do with it, a trader said, hinting that a tweet by President Trump aimed at Nordstrom, Inc.’s recent decision to abandon his daughter Ivanka Trump’s brand may have had something to do with Neiman’s movement, though Nordstrom stock and bonds were both up on the session.

Neiman’s 8% notes due 2020 were off 1½ points to 66½, a trader said, while the 8¾% notes due 2021 were down 1¼ points to 53¾.

On the other hand, L Brands’ 6 7/8% notes due 2035 were up ½ point to 100¼, a trader said.

Intelsat weaker

Satellite communications company Intelsat Jackson Holdings continued to turn on the session, though traded tight yet again.

The 7¼% notes due 2020 were down ½ point to 78½, a trader said, while another trader said the same notes were down 5/8 point to the same level.

Seeing a steeper loss were the 5½% notes due 2023, which were down “about a point” to 69, a trader said.

In health and pharma

For a hospital group and a pharmaceutical company, movement drifted downward on Wednesday.

Community Health Systems, Inc.’s 8% notes due 2019 were down 1 point to 88 7/8, a trader said.

Global specialty biopharmaceutical company Mallinckrodt Pharmaceuticals, which a trader said had been down over the past few sessions, was down again on the session in its 5¾% notes due 2022, which were down 1/8 point to 95 3/8.

In energy

After a ¼-point gain in Murray’s 11¼% notes due 2021 on Tuesday, the notes lost the exact amount on Wednesday. They finished with a 73½ handle, a trader said.

Oil rose less than 1% on the global market, but that did little to help California Resources on Wednesday, as its 8% notes due 2022 were down ¾ point to 86½ on “active” trading, a trader said.

A market source said the notes were down 2½ points to 86¾.

And Hornbeck Offshore Services, Inc.’s 5% notes due 2021 were up ¾ point to 68½.

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