Rite Aid notes crater after merger called off; Ultra Petroleum issues drop after earnings release

By James McCandless

San Antonio, Aug. 9 – Traders described Thursday in the distressed debt market as crowded amid multiple earnings statements.

Rite Aid Corp. notes cratered after the cancellation of a merger with grocery chain Albertsons, prompting several ratings changes.

Ultra Petroleum Corp. issues declined after the Thursday morning release of its Q2 earnings report, missing earnings and revenue estimates.

Commonwealth of Puerto Rico paper improved after Wednesday’s news that the government reached an agreement with sales tax bondholders.

Frontier Communications Corp. notes were mixed. The company released a disappointing earnings report last week.

Sanchez Energy Corp. issues saw another multi-point decline. A recent Q2 earnings report did not meet analyst estimates.

Diebold Nixdorf, Inc. paper saw another multi-point decline as the market continues to react to a disappointing earnings report.

Rite Aid craters

Camp Hill, Pa.-based retail drugstore chain Rite Aid notes plummeted, traders said, after reports confirmed that the company had terminated a potential merger with grocery store chain Albertsons Co. LLC before shareholders could vote on the matter. The move prompted ratings changes from Fitch Ratings and Moody’s Investors Service, both making changes to reflect the company’s weaker position in its industry. (See related stories elsewhere in this issue.)

“That really kicked things into overdrive as far as volume goes,” a trader said. “I can see these going even lower. I don’t see a positive catalyst for a while.”

The 7.7% notes due 2027 dropped about 6½ points to close at 76 bid.

Ultra Petroleum down

Houston-based independent oil and gas producer Ultra Petroleum issues fell, market sources said, after the company released its Q2 earnings report Thursday morning. The company reported a 17 cents per share profit, just shy of analysts’ estimates of 18 cents per share profit. It also reported $190.14 million in revenues, also missing expectations.

“These distressed energy names fall into a cycle where their production numbers are weak, their revenues suffer and they can’t get back on track,” a trader said.

The 7 1/8% notes due 2025 fell 11 points to close at 50 bid. The 6 7/8% notes due 2022 lost about 8½ points to close at 55¾ bid.

Puerto Rico improves

The prices of Commonwealth of Puerto Rico bonds improved on Thursday following Wednesday's news that the government reached an agreement with sales tax bondholders, a market source said.

The deeply distressed Commonwealth of Puerto Rico 8% Series 2014A general obligation bonds due July 2035 traded in the mid-50s on Thursday, after trading in the low-to-mid-40s earlier in the week, the source said.

A debt restructuring would see the commonwealth save $17.5 million in interest payments, the source said.

Senior debt holders would see a recovery of 93 cents on the dollar, while subordinated debt holders would see 56 cents on the dollar.

Volume names trade

Norwalk, Conn.-based wireline communications name Frontier Communications issues ended mixed.

On Friday, Standard & Poor’s lowered its issuer credit rating, senior unsecured debt rating and affirmed a negative outlook.

On Tuesday, the company issued its Q2 earnings report, missing analyst estimates of a 72 cents per share loss with an 80 cents per share loss. It also reported an $18 million net loss.

The 7 5/8% notes due 2024 added about 1¼ points to close at around 67½ bid. The 10½% notes due 2022 rose about ¾ point to close at around 91¼ bid. The 11% notes due 2025 shaved off about ¼ point to close at 81 bid.

On Wednesday, the 7 5/8% notes lost about 1¼ points, the 10½% notes shaved off about 1¼ points and the 11% notes fell about ¾ point.

Houston-based independent oil and gas name Sanchez Energy declined again. The company reported a 26 cents per share loss in its Q2 earnings statement, falling short of the expected 6 cents per share profit. Its oil production numbers missed its own estimates.

The 6 1/8% paper due 2023 dropped 4¼ points to close at 56 bid.

On Wednesday, the 6 1/8% paper fell about 2¼ notes.

North Canton, Ohio-based connected commerce solutions company Diebold paper continued to drop. On Tuesday, Moody’s Investors Service lowered its corporate family rating and probability of default rating.

Last Thursday, the company reported a 29 cents per share loss in its Q2 earnings report, missing analyst expectations of a 1 cent per share profit.

The 8½% paper due 2024 lost 7¼ points to close at 57¼ bid.

On Wednesday, the 8½% paper lost 2¾ points.

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