AMC, Diamond Sports, Transocean up; Exela rallies; China Evergrande hits low teens

By Cristal Cody

Tupelo, Miss., Jan. 3 – Junk paper from AMC Entertainment Holdings, Inc. and Diamond Sports Group LLC ranked among the most active issues in the distressed secondary market on Monday.

“Diamond Sports and AMC both were up ¾ point,” a source said.

AMC’s 10% senior secured second-lien notes due 2026 (Ca/CCC-) saw nearly $23.25 million of secondary volume.

Diamond Sports’ secured notes attracted over $11 million of supply.

Meanwhile, Exela Technologies, Inc.’s 11½% first priority senior secured notes due 2026 rallied around 5 points on Monday following a “panic dump at the end of last year,” a source said.

China Evergrande Group’s dollar notes were quoted now trading with handles in the 13 bid range.

Trading was halted on Monday in China Evergrande’s stock on the Hong Kong Stock Exchange ahead of a pending announcement from the company.

Otherwise, the distressed market saw fairly thin supply over the first session of 2022, sources reported.

“There’s not a lot of secondary,” one source said.

While the investment-grade primary market kicked into gear on Monday with more than $11 billion of bonds marketed during the session, junk issuance was quiet.

Overall market tone was mixed with stocks stronger on the day. The Nasdaq climbed 1.2%.

The iShares iBoxx High Yield Corporate Bond ETF was down 12 cents by early afternoon before improving slightly to head out off 6 cents at $86.95.

February and March crude oil prices climbed over the day.

West Texas Intermediate crude oil benchmark futures for February deliveries rose 87 cents to settle at $76.08 a barrel.

Distressed energy bonds traded about 1 point to over 2 points better on Monday in light secondary activity, a source said.

Transocean Inc.’s 7½% senior notes due 2031 (Ca/CCC) were more than 1¾ points higher at 61 bid on $1.25 million of volume.

AMC notes improve

AMC’s 10% senior secured second-lien notes due 2026 (Ca/CCC-) rose nearly ¾ point to 99¾ bid on $23.25 million of secondary supply on Monday, sources said.

The Leawood, Kan.-based movie theater owner’s notes have improved from a 93 handle in December.

Diamond Sports up

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa1/CCC) rose ¾ point to 50¾ bid on over $11 million in secondary volume on Monday, sources said.

The notes have gained about 2 points since trading ahead of the holidays at 48¾ bid.

The Chesapeake, Va.-based sports broadcast group entered into a multiple-year renewal of its distribution rights agreement with the National Hockey League in December.

Exela notes jump

Exela Technologies’ 11½% first priority senior secured notes due 2026 (Caa3/CCC-) went out nearly 5¼ points higher at 76 3/8 bid on over $7.4 million of paper traded on Monday, a source said.

The notes were sold at a “ridiculous discount and people realized the value’s still there and they’re back at 76,” another source said.

The notes had dropped in secondary trading over the last week of 2021, moving from 77½ bid on Dec. 29 to closing the year out at 71 1/8 bid.

In December, Exela completed a distressed debt exchange of its 10% senior secured first-lien notes due 2023 (Caa3/CCC-) for the new 11½% first priority senior secured notes due 2026.

Exela reported that $912.66 million, or 97.6%, of the outstanding notes were tendered under the offer to exchange up to $225 million in cash and the new 11½% notes for the 10% notes.

The Irving, Tex.-based software and services company also completed several at-the-market equity programs in 2021, including a $100 million at-the-market equity program and a $150 million at-the-market equity program.

Evergrande declines

Evergrande’s 8¾% senior notes due 2025 (C/C/C) were quoted now trading in 2022 at the 13 bid area, a source said.

The notes were last active in the secondary market on Dec. 13 at 20¼ bid. The bonds have declined about 70 points since May 2021.

The 11½% notes due 2023 also opened the year at the 13 bid area.

The 2023 issue was last active at 20½ bid on Dec. 7 and finished the year well off the 98¾ bid range seen in May.

Evergrande’s other dollar notes were not seen in the secondary space on Monday.

The company’s 9½% notes due 2024 headed out on Thursday at 14 bid, finishing 2021 down from 22½ bid at the start of December and well off the 89½ bid range in May 2021.

Fitch Ratings and S&P Global Ratings dropped the Shenzhen, China-based real estate developer to default status in December following the end of grace periods on missed coupon payments.

China’s property developer space saw numerous defaults late in the year from issuers including Kaisa Group Holdings Ltd.’s Fantasia Holdings Group Co. Ltd., Sinic Holdings (Group) Co. Ltd., China Properties Group Ltd., Modern Land (China) Co. Ltd. and Sunshine 100 China Holdings Ltd.

China’s property developer space has a default rate for 2022 pegged at the 30% range and could go as high as 65%, according to BofA Securities Inc. analysts.

Chinese offshore defaults rose 28% to about $7.8 billion over the first three quarters of 2021, according to Moody’s Investors Service.

Index posts 2021 returns

Distressed index returns ended 2021 with gains for December and the year.

On Friday, the S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return was minus 1.12%, while month-to-date returns were 0.94%.

Quarterly returns, as of Friday, remained soft at minus 5.61%.

The index posted year-to-date total returns on Friday of 22.92%.

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