Staples struck down on Amazon challenge; Bombardier battered on C-Series glitch; hospital names off

By Paul Deckelman

New York, Oct. 25 – Retailer Staples Inc.’s bonds fell sharply on busy volume, pushed down by the news that online retailing giant Amazon.com will offer two-day shipping on office supply products.

The Amazon move is seen as a direct challenge to Staples, an office supplies seller.

And aircraft maker Bombardier Inc.’s notes lost altitude across the board as the company said it is reviewing delivery plans for its new C-Series aircraft in light of problems with the separately manufactured engines.

Bombardier rival Boeing Corp. maintains that it will continue to press its trade case against Bombardier despite the recently announced deal to have Airbus take control of Bombardier’s C-Series aircraft program and do final assembly on the planes in Alabama.

In the healthcare sphere, hospital names like Community Health Systems, Inc. and Tenet Healthcare Corp. were seen lower after sector peer Acadia Healthcare reported weak quarterly numbers.

Staples gets slammed

Traders saw Staples Inc.’s 8½% notes due 2025 hammered down by more than 2 points on the session, with one market source seeing the Framingham, Mass.-based office supplies retailer’s paper ending at 89 3/16, calling that a 2½-point loss, with over $43 million having traded.

“Staples was plenty active today,” another trader said, “with Amazon challenging their business.”

He too saw those bonds down more than a deuce on the day at 89 bid.

A third trader was amazed to find that the Staples issue “is now officially in distress,” as its yield ballooned out to the 10½% mark.

He located the notes at 89 1/8 bid.

The traders pointed to news reports that internet retailing giant Amazon.com plans to offer businesses in the United States and Germany the same kind of two-day shipping service for their orders that its Amazon Prime customers enjoy on their orders delivered to their homes.

“Is there anything that Amazon won’t own?” a trader asked rhetorically, noting the inroads that Amazon has already made in areas such as sales of books and electronics, and other products traditionally dominated by brick-and-mortar department stores and big-box retailers.

Bombardier bonds bombed

Elsewhere, traders said that Bombardier Inc.’s bonds were lower across the board, buffeted by news reports that the Montreal-based aircraft market may have to delay deliveries on its new C-Series planes because of delays in getting engines from producer Pratt & Whitney. The latter company has been making modifications on some of its engines due to glitches surfacing earlier in the year.

On top of that, U.S.-based Bombardier rival Boeing Corp. said it will continue to press its unfair trade practices case against the Canadian company, which caused the U.S. Commerce Department to threaten to slap Bombardier’s Canada-built planes with as much as a 300% tariff.

Boeing shrugged off the recent announcement that European aircraft giant Airbus will take control of the C-Series project and do final assembly work on the planes in Mobile, Ala.

Bombardier’s 8¾% notes due 2021 were seen down more than 1 point at 111 7.8 bid, with over 417 million traded.

Its 7½% notes due 2025 dropped 1¼ points, to 104¾ bid, on volume of more than $12 million.

Hospitals hit on Acadia weakness

A trader said that hospital names like Community Health Systems, Tenet Healthcare and HCA Inc. were all lower, “dragged down on Acadia Healthcare’s bad numbers.”

He said “the weaker hospital names” like Community Health Systems were especially vulnerable, with its 6 7/8% notes due 2022 off 1 1/8 point at 74 7/8 bid, with over $15 million traded.

He saw Tenet’s 5 1/8% notes due 2025 off by 3/8 point, at 97 5/8 bid, with over $12 million traded.

And HCA’s 5 7/8% notes due 2026 closed at 106 bid, down nearly 1 full point on the day, with over $9 million traded.

And he said Acadia’s own several series of bonds were lower on the day.

© 2015 Prospect News.
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