Endo notes mixed on missed payment; Bed Bath & Beyond lower; Rite Aid paper declines

By Cristal Cody

Tupelo, Miss., June 30 – Endo International plc’s secured bonds declined on Thursday after the market woke to the company’s announcement that it missed a $38 million payment on its 6% senior notes due 2028.

The unsecured notes rose about 1¾ points to 2 points, while Endo’s secured bonds softened about ¾ point to 1 point.

Endo reported in an 8-K filing with the Securities and Exchange Commission on Thursday that it “elected not to make” the interest payment and has a 30-day grace period before a default is official.

“The company chose to enter the grace period as it continues discussions with certain creditors in connection with the company’s evaluation of strategic alternatives,” Endo said in the filing. “The company’s decision to enter the grace period was not driven by liquidity constraints, as it had approximately $1.4 billion in cash as of March 31, 2022.”

Just on Monday, a group of Endo’s unsecured noteholders announced they retained White & Case LLP and GLC Advisors & Co., LLC as legal and financial advisers and had proposed several transactions to Endo, including a cash tender offer or a debt-for-debt exchange.

S&P Global Ratings downgraded the issuer over the session.

Bed Bath & Beyond Inc.’s senior notes continued to sink after sliding about 10 points on Wednesday following the company’s report of a heavy fiscal first-quarter net loss and a management shake-up.

Rite Aid Corp.’s notes also softened after a downgrade from S&P on Thursday, while its credit default swap spreads tightened over 250 basis points this week.

Market tone slumped on Thursday with stock indices down across the board, crude oil about $4 lower and the primary bond markets seeing little issuance as June wrapped up.

The iShares iBoxx High Yield Corporate Bond ETF was 0.05% lower at $73.61.

Meanwhile, high-grade issuers remained under pressure.

On Wednesday, of the top 10 most active investment-grade bonds on Trace, five carried handles in the 60s, 70s and low 80s.

Oracle Corp.’s 3.85% notes due 2060 (Baa2/BBB) were trading Thursday up ¾ point at 69 bid, a source said.

Amazon.com Inc.’s 2.875% notes due 2041 (A1/AA) were modestly softer at the 80 bid area over the session.

The New York Federal Reserve announced on Wednesday that it launched a monthly corporate bond market distress index to measure primary and secondary market conditions.

According to the June index, the corporate bond market functioning appears healthy, though “market functioning is somewhat more strained in the investment-grade segment of the market.”

Earlier in June, BofA Securities Inc. analysts reported that more than $300 billion liquid investment-grade bonds were trading at dollar prices below 75 points, including paper from Apple Inc., Google Inc., Microsoft Corp., Berkshire Hathaway Energy Co., JPMorgan Chase & Co., Merck & Co. and Verizon Communications Inc.

S&P reported Tuesday that it now expects the U.S. trailing 12-month speculative-grade corporate default rate to hit 3% by March 2023, up from 1.4% in March 2022.

Endo bonds mixed

Endo’s bonds were mixed after the company reported the missed payment on the 6% notes, a source said.

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/C) rose about 1¾ points to 2 points to the 7¾ to 8 bid range.

Endo Luxembourg Finance Co. Sarl’s 6 1/8% senior secured first-lien notes due 2029 (Caa2/CC) gave back about 1 point to head out at the 75½ bid area.

Endo subsidiary Par Pharmaceutical Inc.’s 7½% senior secured notes due 2027 (Caa2/CC) dropped about ¾ point by the afternoon to the 76¼ bid area.

Endo’s bonds plunged more than 35 points in May on weak first-quarter earnings and a forecasted second-quarter loss.

The Dublin-based pharmaceuticals maker has been embroiled in opioid-related litigation across the country and settled several opioid-related lawsuits in 2021 and 2022, including with Alabama, San Francisco and Florida.

Bed Bath drops

Bed Bath & Beyond’s 5.165% senior notes due 2044 (B3/B+) declined another 3¼ points to 22 bid in strong secondary action on Thursday, a source said.

The notes have shed more than 20 points in the back half of June.

The Union, N.J.-based home products retailer on Wednesday reported fiscal first-quarter losses and several executive changes, including the removal of the company’s chief executive officer.

Rite Aid softens

Rite Aid’s 8% senior secured notes due 2026 (B3/CC/BB-) dropped nearly 1 point to the 77¾ bid area on Thursday in mostly light trading, a source said.

The bonds have declined about 3½ points this week.

S&P downgraded the issuer to SD from CC on Thursday following the company’s below-cash tender offer it views as distressed.

Rite Aid reported it completed tender offers for up to $150 million of its 7½% senior secured notes due 2025, 6 7/8% debentures due 2028 and 7.7% senior debentures due 2027 that were oversubscribed by the early deadline on Monday.

The company did not accept any of the tendered notes from the 8% issue.

Meanwhile, the Camp Hill, Pa.-based drug retailer’s CDS spreads tightened 265 bps to 2,170 bps for the past week ended Wednesday, a market source said.

In the prior week, Rite Aid’s CDS spreads firmed 290 bps.

Distressed index drops

S&P U.S. High Yield Corporate Distressed Bond index returns continued to decline over Wednesday’s session.

One-day total returns slid to minus 1.3% from minus 0.58% on Tuesday and minus 0.11% on Monday.

Month-to-date total returns dropped to minus 7.68% from minus 6.47% on Tuesday and minus 5.92% at the start of the week.

Year-to-date index also moved out to minus 21.08% on Wednesday from minus 20.04% on Tuesday and minus 19.57% on Monday.

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