PetSmart notes active as term loan eyed; Mallinckrodt paper varies in pharma space

By James McCandless

San Antonio, Oct. 21 – As the week reached its midpoint, shifting ground in retail and pharma marked the distressed debt market.

PetSmart Inc.’s notes were active but diverging in direction as the company prepares to price a term loan.

Sector peer Revlon, Inc.’s issues also ended in mixed movements.

Meanwhile, in the pharma space, Mallinckrodt plc’s paper varied as a peer in the industry settled all opioid claims against it.

As oil futures took a dive, SM Energy Co.’s notes followed while Occidental Petroleum Corp.’s issues drifted apart and Antero Resources Corp.’s paper rose.

In the travel space, United Airlines Holdings, Inc.’s notes were seen gaining while American Airlines Group, Inc.’s issues moved on separate tracks.

Elsewhere, AMC Entertainment Holdings, Inc.’s paper declined a day after announcing a common stock sale.

PetSmart notes diverge

PetSmart’s notes were active but diverging through the session, traders said.

The 8 7/8% senior notes due 2025 held level to close at 104½ bid. The 5 7/8% senior notes due 2025 inched up ¼ point to close at 103¼ bid.

The Phoenix-based pet supplies retailer’s structure saw more attention as the company prepares to price a $2.3 billion term loan.

On Wednesday, S&P Global Ratings assigned a B issue-level rating to the senior secured term loan and $1.2 billion of senior secured notes.

The agency also gave a CCC+ issue-level rating to the proposed $1.15 billion of senior unsecured notes.

The outlook is stable, with S&P expecting the company to improve on its recent positive performance and forecasts single-digit revenue growth by the end of the year.

Moody’s Investors Service assigned the proposed offering a B1 rating.

New York-based cosmetics maker Revlon’s issues ended with mixed movements.

The 5¾% senior notes due 2021 lost 2½ points to close at 25½ bid. The 6¼% senior notes due 2024 picked up ¼ point to close at 10¼ bid.

Mallinckrodt varies

Meanwhile, in the pharmaceuticals space, Mallinckrodt’s paper varied, market sources said.

The 5 5/8% senior notes due 2023 declined ½ point to close at 35 bid. The 4¾% senior notes due 2023 shot up ½ point to close at 10½ bid.

During Wednesday’s activity, the pharma sector was rocked after the Department of Justice announced that industry giant Purdue Pharma had agreed to plead guilty to criminal charges related to the marketing of opioids.

The company faces penalties of about $8.3 billion.

Last week, Mallinckrodt, the Staines-upon-Thames, England-based drug producer, filed for Chapter 11 bankruptcy after facing similar claims over opioids.

As part of the agreement, claimants related to opioid litigation would receive $1.6 billion in structured payments, including $450 million upon the company’s emergence from the process.

Oil futures dive

As oil futures took a dive, distressed energy tranches took independent paths, traders said.

West Texas Intermediate crude oil futures for December delivery slipped $1.67 to finish the day at $40.03 per barrel.

North Sea Brent crude oil futures for December delivery capped the session at $41.73 per barrel after a $1.43 decline.

Denver-based independent oil and gas producer SM Energy’s notes followed futures downward.

The 6¾% senior notes due 2026 tripped 2 points to close at 40½ bid. The 6 5/8% senior notes due 2027 fell 1¾ points to close at 41¾ bid.

Houston-based producer Occidental Petroleum’s issues drifted apart.

The 2.9% senior notes due 2024 closed level at 88 bid. The 2.7% senior notes due 2022 shed ¼ point to close at 95½ bid.

Antero Resources, another Denver-based E&P company, saw its paper rise.

The 5 1/8% senior notes due 2022 garnered ¼ point to close at 91 bid. The 5% senior paper due 2025 reached up 1½ points to close at 70¾ bid.

Airlines active

In the travel space, United Airlines’ notes were seen gaining, market sources said.

The 5% senior notes due 2024 improved by 3¼ points to close at 89¾ bid. The 4¼% senior notes due 2022 rose ¼ point to close at 93¼ bid.

The Chicago-based air carrier and others in the sector are waiting for the U.S. government to approve a second round of $25 billion in payroll protection aid.

At the beginning of October, the first round that was passed in March expired, triggering thousands of furloughs.

“I don’t think that any stimulus is getting passed in the next few weeks,” a trader said. “They may decide to carve out airline stuff and pass that quicker, but who knows really.”

Fort Worth-based American Airlines’ issues moved on separate tracks.

The 5% senior notes due 2022 closed level at 69¼ bid. The 11¾% senior notes due 2025 shaved off ¼ point to close at 99½ bid.

AMC declines

Elsewhere, theater operator AMC’s paper declined, traders said.

The 12% notes due 2026 were docked 1½ points to close at 7½ bid. The 10½% notes due 2025 were pushed down ¼ point to close at 61¼ bid.

On Tuesday, the Leawood, Kan.-based company announced that it would sell up to 15 million shares of its common stock.

Along with starting the offering, the company warned investors that if it does not raise sufficient capital or restructure by the end of the year it would be in danger of filing for Chapter 11 bankruptcy.

AMC said on Monday that it would reopen locations in New York state this week after receiving guidance from governor Andrew Cuomo.

The newest reopenings bring the number of locations operating to 530.

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