Chapter 22 (Retail). Payless Inc.earned itself an S&P Global Ratings downgrade this week to CCC after "operating performance...continued to deteriorate meaningfully in the third quarter of fiscal 2017, following its emergence from bankruptcy in August 2017, a trend we expect to persist in fiscal 2018." S&P also assessed the shoe retailer's liquidity down to "weak" from "adequate." Yikes. Shoe retailers just can't seem to catch a break. Formerly-bankrupt rue21 Inc. also doesn't seem to be recovering well despite its recent emergence from bankruptcy with a wildly trimmed down balance sheet. Reuters reported this week that the company is in need of financing after an underwhelming holiday season. As we stated previously, Kirkland & Ellis LLP may want to hold off on celebrating their awards.
Energy. Jones Energy Inc. ($JONE) is facing opposition from bondholders over its proposed $450mm first-lien deal. Davis Polk & Wardwell LLP has been retained to advise the bondholders.
Pharma. After adjusting guidance, Teva Pharmaceutical Industries Ltd. ($TEVA) was downgraded this week by S&P Global Ratings to BB due to a "series of lower-than-expected operating results." The company is facing increased competition, drug price regulation and negative effects from tax reform; it also carries $32.5b of acquisition-related debt. Both the company's stock and bonds took a dive this week. Meanwhile, Purdue Pharma LPannounced that it will cut its sales force by more than half to 200 and stop promoting opioid drugs to doctors in the US. PETITION Reminder: time to dig in on which companies have real exposure to opioid-related risk.
Retail (CPG). Claire's Stores Inc. has adopted a key employee retention program that pays certain executives $2.55mm in the aggregate presumably so that their expertise doesn't jump ship prior to the company's seemingly inevitable bankruptcy filing. You'll recall that Toys R Us executives received similar bonuses prior to that bankruptcy filing - a point that proved contentious in the context of post-bankruptcy incentive plan. In the context of an upgrade of Tempur Sealy International Inc's stock ($TPX), Wedbush analyst Seth Basham had some choice commentary about Mattress Firm's future (see image below).
Retail (Grocery). Southeastern Grocers LLC, owner of Bi-Lo and Winn-Dixie supermarket chains, has an interest payment due on 2/15/18 on two tranches of notes. It will almost certainly NOT make the payment.
