Nordstrom notes better on earnings outperformance; SM Energy higher amid ratings cut

By James McCandless

San Antonio, Nov. 25 – In the middle of a truncated week, the distressed debt space gave its attention to retail and energy names.

Nordstrom, Inc.’s notes improved after the company reported better-than-expected results for the third quarter.

Sector peer Revlon, Inc.’s issues gained.

In the oil and gas space, SM Energy Co.’s paper pushed higher despite receiving a ratings downgrade.

Drilling name Transocean Ltd.’s notes were seen drifting amid a ratings upgrade.

With oil futures extending a run of improvements, Occidental Petroleum Corp.’s issues followed while Antero Resources Corp.’s paper varied in direction.

Meanwhile, steelmaker United States Steel Corp.’s notes were on the rise as the company closed a deal for environmental bonds.

Travel names United Airlines Holdings, Inc.’s and American Airlines Group Inc.’s issues ended on better ground.

Nordstrom, Revlon improve

Nordstrom’s notes improved by the end of the session, traders said.

The 5% senior notes due 2044 jumped up 4 points to close at 91½ bid. The 4 3/8% senior notes due 2030 rose ¾ point to close at 93¼ bid.

After the close on Tuesday, the Seattle-based department store chain released its earnings report for the third quarter.

The company reported a profit of 22 cents per share, better than expectations by analysts of a profit of 1 cent per share.

Revenues underperformed expectations at $3.09 billion.

Online sales rose by 37%, comprising 54% of total sales for the quarter.

The company also said that it was able to reduce overhead by about 20%.

Retail names have seen a respite in recent weeks after a handful of drug producers have announced high efficacy rates from Covid-19 vaccine candidates. The drugs are seen as essential to combatting the virus and reviving the economy.

New York-based cosmetics maker Revlon’s issues gained.

The 5¾% senior notes due 2021 tacked on ¼ point to close at 100 bid. The 6¼% senior notes due 2024 garnered 2¼ points to close at 27¼ bid.

SM Energy higher

In the oil and gas space, SM Energy’s paper pushed higher, market sources said.

The 5 5/8% senior notes due 2025 picked up 3¾ points to close at 58 bid. The 6¾% senior notes due 2026 added 4 points to close at 55½ bid.

The Denver-based independent oil and gas producer’s paper was positive despite the ratings downgrade it received on Wednesday morning.

S&P Global Ratings slashed the overall rating for the company to SD from CCC+ while lowering a few issue-level ratings.

The agency attributed the downgrades to the company’s recently disclosed debt exchanges, which it considers a selective default.

In its recent third-quarter earnings report, SM Energy showed a loss of 5 cents per share and revenues of $281.02 million.

Transocean drifts

Drilling name Transocean’s notes were seen drifting downward, traders said.

The 7½% senior notes due 2031 gave back ¾ point to close at 28 bid. The 11½% senior notes due 2027 fell 2¾ points to close at 52¼ bid.

During Wednesday activity, the Steinhausen, Switzerland-based contract driller was another in the energy sector to receive a ratings change.

S&P issued upgrades, lifting the overall rating to CCC- from SD, and similarly picked up some issue-level ratings.

The outlook is negative.

In a note, the agency said that it expects the company to engage in “additional distressed transactions” to wrangle with its $7.7 billion in outstanding debt.

Oil trends upward

With oil futures extending a run of improvements, distressed energy names largely trended upward, market sources said.

West Texas Intermediate crude oil futures for January delivery reached up 80 cents to finish at $45.71 per barrel.

North Sea Brent crude oil futures for January delivery ended at $48.61 per barrel after a 75 cent pickup.

Houston-based producer Occidental Petroleum’s issues followed futures.

The 2.9% senior notes due 2024 inched up ¼ point to close at 93¾ bid. The 2.7% senior notes due 2022 rose ½ point to close at 98¾ bid.

Denver-based E&P Antero Resources’ paper varied in direction.

The 5 5/8% senior notes due 2023 declined 1¼ points to close at 88 bid. The 5% senior notes due 2025 pushed up 1¾ points to close at 80½ bid.

U.S. Steel notes rise

Meanwhile, U.S. Steel’s notes were on the rise, traders said.

The 6 7/8% senior notes due 2025 grabbed ½ point to close at 93 bid. The 6.65% senior notes due 2037 tacked on 1¼ points to close at 81½ bid.

On Wednesday, the Pittsburgh-based steel producer closed a $63.4 million sale of environmental improvement revenue bonds with green bond designation, Prospect News reported.

The green bonds issued through the Industrial Development Board of the City of Hoover, Ala, have a coupon of 6 3/8% and carry a final maturity of 2050.

During Tuesday’s session, an analyst at GLJ Research upgraded the company’s common stock to “buy” from “hold.”

In a note, the analyst expects a revival in the high-end auto steel markets and rises in global steel prices.

Airlines improve

Travel name United Airlines’ issues ended on better ground, market sources said.

The 5% senior notes due 2024 gained ¾ point to close at 99¼ bid. The 4¼% senior notes due 2022 moved up ¼ point to close at 100 bid.

Earlier this week, the Chicago-based airline announced that it would raise $1 billion in new capital.

The company said in a Securities and Exchange Commission filing that it would sell 25.3 million shares of common stock.

For months, the industry has been in a holding pattern, awaiting a new round of government stimulus held up in negotiations.

Fort Worth-based commercial flight company American Airlines’ paper moved the same way.

The 5% senior notes due 2022 rose 1 point to close at 84¼ bid. The 11¾% senior paper due 2025 garnered 1¼ points to close at 112 bid.

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