Talen Energy bonds drop; Rite Aid perks up ahead of earnings; Diamond Sports softens

By Cristal Cody

Tupelo, Miss., April 12 – Distressed paper from Talen Energy Supply LLC slid about 2½ points to 3 points in active trading on Tuesday.

Talen Energy’s 10½% senior notes due 2026 were among the most active distressed issues trading over the session, a source said. The notes dropped 2½ points.

Meanwhile, Rite Aid Corp.’s notes were trading 1¾ points to 2 points higher ahead of the company’s widely anticipated fourth-quarter earnings release this week.

Distressed paper in the oil and gas space was mostly quiet with oil prices rallying past $100 a barrel on Tuesday, according to a market source.

West Texas Intermediate crude oil benchmark futures for May delivery settled $6.31 higher at $100.60 a barrel.

Market volatility was little changed, while stocks declined on the day as focus shifts to first-quarter earnings releases this week.

In the junk space, the iShares iBoxx High Yield Corporate Bond ETF closed up 61 cents to $80.30.

In other distressed issues active on Tuesday, Diamond Sports Group LLC’s secured and unsecured notes fell about ¼ point to ½ point.

Talen bonds drop

Talen’s paper slid about 2½ points to 3 points in active trading over the day, a source said.

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) swung 2½ points lower on volume totaling $13 million.

The issue went out at 33½ bid, down from 36 bid on Friday.

Talen’s 6½% senior notes due 2025 (Caa2/CCC/CCC) also were under pressure, losing 3 points to head out at 32 bid.

Secondary trading in the issue was lighter with $3 million of supply.

The notes have softened 4¼ points since Friday.

Talen’s senior notes remain up from handles in the low 20s seen in late March on reports the company is in restructuring talks.

Last week, the Woodlands, Tex., and Allentown, Pa.-based power generation and infrastructure company’s credit default swap spreads firmed over 7,800 basis points to 8,103 bps.

Rite Aid improves

Rite Aid’s 8% senior secured notes due 2026 (B3/CCC/BB-) rose 1¾ points to head out at the 86 bid area on Tuesday on $5 million of paper traded, a source reported.

The issue was over ¼ point better on Monday after ending the prior week about 6 points lower.

Rite Aid’s 7.7% senior debentures due 2027 (Caa2/CCC/CCC) also gained 2 points to hit 70½ bid by the close. Secondary supply was lighter with $1 million of notes traded.

The issue finished the past week down about 5 points.

Rite Aid’s notes softened last week after a Deutsche Bank analyst report slashed the company’s stock price target to $1.

Rite Aid will release its fourth-quarter earnings results on Thursday.

The Camp Hill, Pa.-based drugstore company’s credit default swap spreads widened 363 bps to 1,716 bps for the past week ended Wednesday.

Diamond Sports softens

Diamond Sports’ secured and unsecured notes remained under pressure on Tuesday, a source said.

The 5 3/8% second-lien secured notes due 2026 (Caa3/CCC+) softened about ½ point to 37½ bid after trading about 1¼ points weaker on Monday.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CCC-) traded ¼ point to ½ point weaker on Tuesday, going out ¼ point lower at 20¼ bid.

The notes finished the prior week mostly unchanged at 20½ bid.

The Chesapeake, Va.-based sports broadcast group closed on a distressed debt exchange in March that included exchanging its 5 3/8% senior secured notes due 2026 for the new 5 3/8% second-lien notes.

Distressed returns down

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return softened to minus 0.59% on Monday, down from minus 0.01% on Friday and 0.41% in the same session a week ago.

Month-to-date total returns declined to minus 1.25% on Monday from minus 0.06% ahead of the weekend and 0.41% in the week-ago session.

Year-to-date index returns were weak at minus 6.5% on Monday, compared to minus 5.95% on Friday and minus 4.93% in the April 4 session.

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