Diamond Sports notes drop; Transocean climbs; Talen up; Exela exchange bonds soften

By Cristal Cody

Tupelo, Miss., Jan. 11 – Bonds from Diamond Sports Group LLC and Transocean Inc. topped secondary action in the distressed space over Tuesday’s session, sources reported.

Diamond Sports’ paper “has been pretty active and lower,” a trader said.

The company’s unsecured notes slid 3 points, while the secured bonds traded off ¾ point on the day.

Transocean’s paper stood out as the offshore driller’s bonds jumped about 2 points to 2¾ points in strong volume.

“Most energy bonds were bid up,” a source said.

Oil prices rallied nearly $3 over the day.

West Texas Intermediate crude oil benchmark futures for February deliveries settled up $2.99 at $81.22 a barrel.

Callon Petroleum Co.’s 8% senior notes due 2028 (Caa2/D) climbed about 2 points to 104 bid, a market source said.

Talen Energy Supply LLC’s notes improved about ½ point to 1 point in very thin trading over the day.

Overall market tone was stronger in equities, along with the junk and distressed spaces during the session.

The junk space was “red hot today” with a better bid in the market, a source said. “After a couple of weak days, I’d probably call it up ½ point to 1 point. The rates, which were getting killed the last couple of days, have stabilized.”

The iShares iBoxx High Yield Corporate Bond ETF jumped 40 cents, or 0.47%, to $86.34.

Overall distressed secondary action has been light in 2022 so far with traders focused on higher-rated junk names and split-rated issues, sources report.

“There’s a lot of uncertainty surrounding rates right now, and if you’re uncertain about rates, it probably pays to be in somewhat higher quality less rate-sensitive credits versus a triple C index,” a source said. “If there was a rate hike in the next six months, those names could get potentially shredded if there’s an equity market collapse or a sell-off.”

Exela Technologies, Inc.’s 11½% first priority senior secured notes due 2026 have been fairly active in the secondary market so far in 2022 and were down about 1 point on Tuesday.

“They did an exchange recently, and the new exchange bonds keep trading lower,” a source said.

Final default tally

In other distressed market activity, S&P Global Ratings and Fitch Ratings reported final default figures for 2021.

In 2021, 51% of defaults were related to distressed exchanges, up from 35% in 2020, S&P said.

Global corporate defaults dropped nearly 70% to 72 in 2021, the lowest since 2014.

The United States led the tally in 2021 with 40 defaults, followed by emerging markets that contributed 15 defaults, S&P said.

Fitch Ratings reported the default rate for U.S. high-yield bonds finished 2021 at 0.5%, down from 5.2% in 2020.

Diamond Sports softens

Looking at the secondary market, Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa1/CCC) fell ¾ point to 50 bid on heavy volume of more than $19.5 million on Tuesday, a source said.

The bonds were down 2¾ points to 50¾ bid on over $12 million of paper traded on Monday.

Diamond Sports’ 6 5/8% senior unsecured notes due 2027 (Ca/CC) also were quoted over 3 points lower at the 28 bid area on $14 million of volume during the session.

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.

Transocean stronger

In the energy space, Transocean’s bonds rallied across the capital structure, sources said.

Transocean’s 6.8% senior notes due 2038 (C/CCC) jumped 2¾ points to 60¼ bid with more than $10.6 million of paper traded on Tuesday.

The 7¼% senior notes due 2025 (Ca/CCC+) traded over 2 points better at 81½ bid on over $11 million of secondary volume.

Transocean’s 11½ senior guaranteed notes due 2027 (Caa3/CCC+) were nearly 2½ points higher near the 102½ bid area on more than $12 million of secondary volume.

The Vernier, Switzerland-based offshore driller’s 7½% senior notes due 2031 (Ca/CCC) also gained 2 points to head out at 64½ bid on over $4 million of trading supply on Tuesday.

Talen thinly traded

In other energy issues, Talen’s bonds have been “kind of quiet” so far in 2022, a source said Tuesday. “Haven’t really seen them.”

The company’s 6 5/8% notes due 2028 rose about 1 point to 89½ bid in just one trade during the session.

Talen’s 10½% senior notes due 2026 (Caa1/CCC/B-) also were up about ½ point to 45½ bid in one trade seen Tuesday.

The Woodlands, Tex., and Allentown, Pa.-based company’s notes have improved about 2 points since the end of December.

Exela notes decline

Exela Technologies’ 11½% first priority senior secured notes due 2026 (Caa3/CCC-) fell about 1 point to 68 bid over Tuesday’s session, according to market sources.

Bond supply totaled $7 million.

The notes had rallied on the first session of 2022 to 76 3/8 bid but have since given back gains.

The bonds went out on Friday down 2 3/8 points at 70 bid.

In December, the Irving, Tex.-based software and services company 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.

Distressed index lower

Distressed index returns were soft on Monday but improved from ahead of the weekend.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return improved to minus 0.25% on Monday, compared to minus 0.3% on Friday but down from 0.38% in the same session a week ago.

Month- and year-to-date index returns totaled 0.31% on Monday, compared to 0.55% on Friday and 0.38% in the week-ago session.

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