Focus turns to ‘inflation panic’; PBF Energy higher; Wesco advances; Midas up 9 points

By Cristal Cody

Tupelo, Miss., Feb. 10 – Some distressed bond issues saw gains in the secondary market on Thursday as volatility soared after the United States reported the strongest rash of inflation since 1982 and fueled anticipation of a major interest rate hike in 2022.

Stock indices were lower across the board, while the Chicago Board Options Exchange’s CBOE Volatility index, known as the market ‘Fear Factor’ index, shot up 19.79% to 23.91.

The iShares iBoxx High Yield Corporate Bond ETF sank $1.11, or 1.32%, to $82.95.

The U.S. Bureau of Labor Statistics reported the January Consumer Price Index rose by a seasonally adjusted 0.6%, higher than market forecasts of a 0.4% rise.

The overall CPI was up 7.5% for the 12 months ending January, the largest annual rise since February 1982, according to the agency.

“Because of the current inflation panic, a lot of focus will be on the year-over-year changes, and from that perspective, the report was discouraging,” according to a Confluence Investment Management note on Thursday.

Bonds in the oil and gas space were mixed with oil prices little changed.

West Texas Intermediate crude oil benchmark futures for March deliveries improved 22 cents to settle at $89.88 a barrel.

PBF Energy Inc.’s 7¼% senior notes due 2025 (Caa1/B/B-) traded over 1 point better on Thursday.

In other distressed issues, Wesco Aircraft Holdings Inc.’s 9% senior secured notes due 2026 (Caa3/CCC+) moved up about 4¼ points over the day with the issue trading 8½ points higher this week.

The 7 7/8% senior notes due Oct. 1, 2022 (C/CC) from Midas Intermediate Holdco II LLC, doing business as Service King, jumped 9 points following news reports the company is in talks for a possible restructuring or bankruptcy filing.

PBF bonds gain

PBF’s 7¼% senior notes due 2025 (Caa1/B/B-) traded over 1 point better to near the 86 bid area, a market source said.

Secondary volume in the Parsippany, N.J.-based petroleum refiner’s notes hit over $14.5 million on Thursday.

The issue has improved from the 79 bid area in late January.

Wesco notes up

Wesco’s 9% senior secured notes due 2026 (Caa3/CCC+) climbed to 91¾ bid, up about 4¼ points on the day and 8½ points higher than at the start of the week, a source said.

Trading totaled $6 million.

Wesco’s 8½% senior secured notes due 2024 (Caa3/CCC+) also improved nearly 1 point to under the 87¼ bid area on stronger volume of $10.65 million on Thursday.

The 8½% senior secured notes were about 2½ points better on the week.

Wesco, acquired in 2020 by an affiliate of investment firm Platinum Equity and combined with U.K.-based aerospace and defense industry supplier Pattonair Ltd., is doing business as Incora.

The Fort Worth-based aerospace supplier’s paper has been active in February following news reports that Incora hired restructuring advisers.

Midas bonds climb

Midas Intermediate Holdco II’s 7 7/8% senior notes due Oct. 1, 2022 (C/CC) headed out up 9 points at 84 bid on light trading totaling $2 million on Thursday, a source said.

The issue remains weaker so far in February after trading at 99¼ bid at the end of January.

Service King’s notes traded as low as 74½ bid in August before improving by the end of 2021 to over the par bid area.

In October, the Richardson, Tex.-based auto body repair provider’s $700 million term loan lenders hired financial advisers as the company faced a $15 million interest payment due on the $375 million outstanding of 7 7/8% notes, a Fitch Ratings report said.

The company, majority-owned by Blackstone Group LP, drew down the remaining $22 million on a revolving credit facility and paid its September term loan interest payment in-kind instead of cash, Fitch said.

Distressed returns improve

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return improved on Wednesday with the index up at 0.47% from minus 0.14% on Tuesday and 0.38% on Monday.

Month-to-date total returns were higher at 0.62% in the prior session versus 0.15% on Tuesday and 0.29% at the start of the week.

Year-to-date returns posted stronger at minus 0.91%, compared to minus 1.38% on Wednesday and minus 1.24% on Monday.

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