PetSmart paper, existing Mattel notes rebound from recent lows; Valeant gains, Fresh Market falters

By Paul Deckelman

New York, Dec. 18 – Investors in distressed debt and the bonds and notes of otherwise underperforming companies and sectors saw upside activity on Monday in two names that had gotten kicked around for most of last week.

PetSmart Inc., whose paper has lately taken a pounding, was seen on the rebound on Monday, though there seemed to be no fresh news out on the specialty retailer.

Mattel Inc.’s recently beleaguered existing bonds – hurt by a multiple ratings downgrade the major agencies laid on the big toy manufacturer – were also higher on Monday.

There meantime was solid upside movement on very heavy volume in the latter company’s newly priced eight-year bond deal.

Elsewhere, the debt-laden Canadian drugmaker Valeant Pharmaceuticals International Inc.’s recently priced eight years were firmer on the day.

But supermarket operator Fresh Market, Inc.’s paper slid.

PetSmart paper pops

For the first time in a number of sessions, traders said that PetSmart’s bonds were not under pressure.

The Phoenix-based retailer of pet food and other pet supplies and services had been in retreat all of last week, on investor worries about weakening EBITDA and fears that the company could choose to spin off its valuable Chewy on-line sales unit to benefit its equity sponsors alone, while the overall company remained stuck paying off the$2 billion of junk bonds it sold to finance the buy of that online business earlier this year.

But on Monday, those oversold notes came back solidly, with its 7 1/8% notes due 2023 up more than two 2 points at 60¼ bid, with over $19 million traded, and its 5 7/8% secured notes due2025 also up by more than a deuce on the day at just under 77 bid, on turnover of some $11 million.

Existing Mattel bonds better

Traders saw continued brisk volume in Mattel Inc.’s existing notes, which had recently been under pressure after Mattel got downgraded a week ago by all three major ratings agencies ahead of its big new bond deal.

Moody’s Investors Service and Fitch Ratings had both knocked Mattel off its former investment grade perch, dropping the credit into junk territory. Standard & Poor’s had already pushed the company into the junk space some weeks previously, but also further downgraded it last Monday.

Against that backdrop, the existing paper had traded mostly lower last week.

But the notes came off those lows on Monday, with a trader suggesting the name had simply been oversold.

He saw its 3.15% notes due 2023 move up by 1 point, to 87 1/8 bid, on volume of more than $9 million.

Mattel’s 5.45% long bond due 2041 gained more than 1 point in intraday dealings, getting as good as around the 84 7/8 bid level, before ending at 84, still up ¾ point on the day, with over $6 million having changed hands.

The new $1 billion issue, which had priced at par off the forward calendar on Friday, was seen Monday at 101 5/8 bid – actually down 5/8 point from its late Friday levels – with over $134 million having traded.

Valeant issue shows gains

Among the recently priced new deals seen trading around on Monday, Valeant Pharmaceuticals International’s 9% notes due 2025 firmed by 5/8 point, to 102 5/8 bid, with over $9 million having traded.

The debt-burdened Laval, Que.-based drug manufacturer priced $1.5 billion of those notes on Dec. 4 at 98.611, yielding 9¼%, after it upsized its drive-by offering from $1 billion originally.

Fresh Market trades off

Elsewhere a trader saw Fresh Market’s 9¾% notes due 2023 fall back by 7/8 point on the day, to 55 7/8 bid, with over $9 million traded.

While a trader saw “a pickup in activity” in the Greensboro, N.C.-based supermarket chain operator’s bonds, he saw no fresh Monday developments that might explain the renewed retreat.

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