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Neiman Marcus High Yield Bonds Slump in Trading Amid Retail Pressure

Neiman Marcus 8% cash-pay notes due 2021 slumped 5.25 points to a new all-time low on Monday, breaking through 60 for the first time as the issuer continues to come under heavy scrutiny amid pressure across the brick-and-mortar retail sector.

The majority of the sell-off was driven by short sellers, with some lightening up of positions reported by investors looking for a better entry point following the recent string of disappointing earnings out of the sector. “They don’t believe it’s a restructuring name, they are just leaning on it because they can and because the cost of carry is just too high,” said one source.

The 8.75% senior PIK-toggle notes lost three points, to 55. Those bonds were issued in 2013 to finance a buyout by Ares Management and the Canada Pension Plan Investment Board.

Further up the capital structure, Neiman Marcus’ TLB (L+325, 1% LIBOR floor) was quoted at 81.25/82.25, down about a point from the last session, sources said. Before the last few weeks, the last time the term debt fell to the low 80s was in early 2016, when the once luxury retailer in January shelved its IPO plans after it reported in December its fifth straight quarter of declining sales and a 25% drop in EBITDA. December’s drop in EBITDA followed a 40% EBITDA decline in its September quarter.

In addition to the string of poor earnings from retailers fueling expectations that Neiman Marcus’ numbers will be weak when it reports in the second week of March, sources also point to weak foot traffic and post-election traffic disruption on Fifth Avenue in New York potentially impacting Neiman Marcus’ Bergdorf Goodman store.

Furthermore, investors are reportedly concerned about the company’s inventory levels, particularly in light of the company’s operational challenges related to the launch of its new common merchandising system, NMG1.

Dallas, Texas–based Neiman Marcus Group, Inc., through its subsidiaries, operates as an omni-channel luxury fashion retailer primarily in the United States. As of Oct. 29, the retailer’s long-term debt totaled $4.77 billion, according to SEC filings. The company is rated B–/B3 with negative outlook on both sides. — Rachelle Kakouris/Kelsey Butler

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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High Yield Bond Investors Withdraw $887M from Market

U.S. high-yield funds recorded an outflow of $887.1 million for the week ended Jan. 18, according to the weekly reporters to Lipper only. This contrasts with a $1.89 billion total inflow over the past three weeks and represents only the second outflow over the past nine weeks.

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The outflow was driven by ETFs, which saw an exodus of $1.035 billion versus an inflow of $148.3 million to mutual funds.

The trailing four-week average fell to an inflow of $250.7 million, from positive $467.7 million last week.

The total inflow for 2016 was $11.12 billion, with 58% ETF-related. Inflows were recorded in 28 of 52 weeks in 2016.

The change due to market conditions last week was a positive $52.5 million, compared to $590.1 million last week. Total assets at the end of the observation period were $211.7 billion. ETFs account for about 22% of the total, at $46.06 billion. — James Passeri

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Mallinckrodt High Yield, Loan Debt Slides re $100M FTC Price-Fix Settlement

Debt backing Mallinckrodt sold off late in the session after the U.K.-based pharmaceutical company said it had settled with the Federal Trade Commission (FTC) over allegations that it used its monopoly to hike drug prices.

According to a statement from the FTC, Mallinckrodt ARD Inc., formerly known as Questcor Pharmaceuticals, Inc., and its parent company, Mallinckrodt plc, have agreed to pay $100 million to settle FTC charges that they violated the antitrust laws when Questcor acquired the rights to a drug that would otherwise threaten its monopoly in the U.S. market for adrenocorticotropic hormone (ACTH) drugs.

Acthar is a specialty drug used as a treatment for infantile spasms, a rare seizure disorder afflicting infants, as well a drug of last resort used to treat other serious medical conditions.

The 5.5% notes due 2025 led the downward move, falling 3.5 points to 86.5 immediately following the news, while the shorter-dated 5.75% notes due 2022 lost 1.5 points, to 92.

The company’s term loan due 2021 (L+275, 0.75% floor) was down more than a point to a 99 bid, from quotes above par before the news.

The New York Times earlier today reported that the FTC “is preparing to file charges” against the company “for allegedly using its monopoly to jack up the price of” its Acthar Gel drug by more than 2,100 percent, to $28,000 per dose.

The FTC’s complaint alleges that, while benefiting from an existing monopoly over the only U.S. ACTH drug, Acthar, Questcor illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot. The acquisition stifled competition by preventing any other company from using the Synacthen assets to develop a synthetic ACTH drug, preserving Questcor’s monopoly and allowing it to maintain extremely high prices for Acthar.

“Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today—an 85,000 percent increase,” said FTC Chairwoman Edith Ramirez in a statement. “We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition. This is precisely the kind of conduct the antitrust laws prohibit.”

Mallinckrodt public limited company develops, manufactures, markets, and distributes branded and generic specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally. — Rachelle Kakouris/Kelsey Butler

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New Book: High Yield Debt: An Insider’s Guide to the Marketplace

A new book by Wasserstein Debt Opportunities CIO Rajay Bagaria

 

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High Yield Debt: An Insider’s Guide to the Marketplace explains the U.S. corporate high yield market in basic terms and as concisely as possible.

From the publisher:

“This book will address how the market has evolved, who buys and issues high yield, high yield debt structures, asset class performance, and how to track and evaluate the market for investment opportunities in a variety of different funds.

“High Yield Debt: An Insider’s Guide will be an indispensable resource to all investors and asset managers, as well as to professionals who play an important role in servicing this thriving marketplace: investment bankers, lawyers, accountants, analysts, rating agencies, and regulators. High Yield Debt: An Insider’s Guide to the Marketplace will help you appreciate the opportunities with high yield debt across the credit cycle.”

More info (and a convenient link, to order) here.

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US High Yield Bond Funds See $564M Investor Cash Inflow

U.S. high-yield funds recorded an inflow of $563.5 million for the week ended Jan. 11, according to the weekly reporters to Lipper only. That marks the third straight week of gains for the asset class for a total of $1.89 billion over the period.


The inflow was mostly driven by ETFs, which accounted for 55% of the total. The four-week trailing average slumped to $468 million, from $1.26 billion in the previous week, as a large $3.75 billion inflow from December rolled off.

The total inflow for 2016 is now $11.12 billion, with 58% ETF-related. Inflows were recorded in 28 of 52 weeks in 2016.

The change due to market conditions last week was a $590 million increase, or roughly 0.3% of total assets. Total assets at the end of the observation period were $212.4 billion. ETFs account for about 22% of the total, at $47.08 billion. — James Passeri

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Lennar Drives By High Yield Bond Mart with $350M Offering

lennarHomebuilder Lennar Corp. is driving by with $350 million of five-year bullet notes today in an SEC-registered offering, sources said. An investor call for the deal is scheduled for noon EST through bookrunners J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, Mizuho, RBC Capital Markets, and Wells Fargo.

The borrower will use the proceeds to fund its acquisition of luxury homebuilder WCI Communities. Lennar announced in September 2016 a merger agreement with WCI, under which it would acquire all of the outstanding shares of the company’s common stock in a transaction valued at $23.50 per WCI share. The transaction gives WCI a total equity value of approximately $643 million and an enterprise value of $809 million.

Proceeds from the notes will also be used for general corporate purposes.

Banks are guiding the offering with expected BB/Ba1 ratings.

Lennar last tapped the market in February 2015 to print $500 million of 4.75% bullet notes due 2021 for general corporate purposes. Pricing for the public offering was at par, and trade data show the notes closed Wednesday’s session at 103.5, for a 3.83% yield.

Miami-based Lennar (NYSE: LEN) engages in homebuilding activities in the United States, primarily through the construction and sales of single-family attached and detached homes. The company has a market cap of $9.9 billion and $6.4 billion in total debt, according to S&P Global Market Intelligence. — Jakema Lewis

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.