Frontier continues to flail; PetSmart paper again firmer; Fresh Market rebounds after downturn

By Paul Deckelman

New York, Dec. 19 – Activity was mostly quiet in the market for distressed debt and bonds of other underperforming companies and sectors on Tuesday, in line with a generally quieter session in the broader high-yield bond market, heading into the traditional year-end lull.

There was considerable activity, however, in Frontier Communications Corp.’s notes, with the wireline telecommunications company’s paper in a familiar position – heading downward on notable volume.

On the upside, Fresh Market, Inc.’s notes, which had been among the major losers on Monday, were seen by traders to have firmed smartly on Tuesday, on brisk volume.

Also in the retailing space, PetSmart Inc.’s notes were seen better for a second straight session.

But Mattel, Inc.’s existing notes were seen lower on the day, reversing Monday’s gains.

Frontier falls again

Traders said that Stamford, Conn.-based Frontier Communications Corp.’s several bond issues were all lower on Tuesday from Monday’s close.

Its 10½% notes due 2022 dropped by 1¾ points, to 75¾ bid, while its 11% notes due 2025 closed at 74 bid, down 1 3/8 points. More than $13 million of each issue traded.

The company’s 8½% notes due 2020 sank by more than 2 points on the session, closing at 85¼ bid.

Fresh Market firms up

A trader said that Fresh Market, Inc.’s 9¾% notes due 2023 – which had been down around 1 point in active dealings on Monday – came roaring back on Tuesday, making up for its lost ground and then some.

He saw the Greensboro, N.C.-based supermarket operator’s paper rebound by more than 4 points from Monday’s closing levels, to end at 59 ¼ bid, on volume of over $23 million.

He did not see any fresh news out about the company to explain the renewed downside activity in its paper on Monday or the bounce on Tuesday.

PetSmart pop continues

Also in the retailing world, for a second straight session, PetSmart, Inc.’s notes have been on the upside, after getting smacked lower throughout most of last week.

A market source said the Phoenix-based pet food and other pet supplies retailer’s 7 1/8% notes due 2023 gained ¼ point Tuesday to close at 60½ bid, on volume of more than $12 million.

The 8 7/8% notes due 2025 were about unchanged at 61½ bid, with over $10 million having traded.

Its senior secured 5 7/8% notes due 2025 gained 1½ points to end at 78½ bid, with about $5 million traded.

Before their firm rebound of the last two days, that paper 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.

Existing Mattel paper off

Mattel Inc.’s existing notes, which had gotten clobbered all of last week but which were seen to have rebounded from their lows on Monday, were back on the losing side of things again on Tuesday.

A trader said that its 2.35% notes due 2019 were down ¼ point Tuesday, to 99 bid, while its 5.45% long bonds due 2041 lost 1 full point to end at 83 bid.

“They popped yesterday [Monday],” he said.

He said its 3.15% notes due 2023 were “unseen,” locating them in an 86-to-86½ bid context.

The notes had fallen last week following multiple ratings-agency downgrades that dropped the credit into junk bond territory, knocking it down from its former investment grade perch.

The El Segundo, Calif.-based toymaker’s new 6¾% notes due 2025 were meantime the most actively traded credit in Junkbondland on Tuesday, with over $63 million seen having changed hands, on top of the more than $134 million that traded on Monday to top the Most Actives list.

And for a second straight trading day, those new notes were seen having come in from the prior day’s levels.

A trader pegged the bonds at par, calling that down 5/8 point on the session.

A second called the notes “down about ½ point or so, and busy.”

On Monday, the notes had traded at 101 5/8 bid, down 5/8 point on the day from where they had finished their initial aftermarket action on Friday.

That regularly scheduled forward calendar $1 billion bond deal had priced at par on Friday and then moved up to around 102¼ bid on initial volume of more than $40 million, before falling back from those peak levels in Monday’s action and continuing that retreat on Tuesday.

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