Qurate Retail, Rite Aid, Staples paper up on week, CDS spreads improve; Avaya declines

By Cristal Cody

Tupelo, Miss., Aug. 11 – A handful of issuers with paper trading in the distressed market saw their credit default swap spreads tighten 150 basis points to nearly 250 bps over the past week ended Wednesday.

Qurate Retail Inc., formerly known as Liberty Interactive Corp., Rite Aid Corp. and Staples, Inc. all firmed.

Paper from the companies was trading mostly flat to higher in the secondary market over Thursday’s session and stronger on the week.

Qurate Retail’s 8½% senior debentures due 2029 (B2/B) were about 3 points higher this week.

Rite Aid’s 8% senior secured notes due 2026 (B3/CCC-/BB-) improved about 1½ points from a week ago.

Staples’ 10¾% senior notes due 2027 (Caa2/CCC+) went out mostly flat on the day but more than 6 points stronger on the week.

Overall distressed secondary supply was light during the day, a source said.

Market tone was mixed after improving Wednesday following better-than-expected July inflation data.

The iShares iBoxx High Yield Corporate Bond ETF fell 45 cents, or 0.57%, to $78.24.

The CBOE Volatility index crept back above a 20 handle, rising 2.33% to 20.20.

In other distressed paper, Avaya Inc.’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) fell ½ point after the company was downgraded on Thursday by S&P Global Ratings and Fitch Ratings.

The notes were trading 10 points lower this week.

Qurate Retail higher

Qurate Retail’s 8½% senior debentures due 2029 (B2/B) traded about 2½ points better at the 78 bid area in mostly light secondary action on Thursday, a source said.

The notes were about 3 points better from last week.

Liberty Interactive’s CDS spreads also came in 150 bps for the past week ended Wednesday to 1,279 bps, a market source said.

The West Chester, Pa.-based media company last week reported lower second-quarter revenue and slightly improved losses.

Rite Aid steady on day

Rite Aid’s 8% senior secured notes due 2026 (B3/CCC-/BB-) went out flat on the day at 87¾ bid, a source said.

The notes were up about 1½ points from a week ago.

Rite Aid’s CDS spreads also tightened 193 bps in the past week ended Wednesday to 1,509 bps, a source said.

The Camp Hill, Pa.-based drug retailer’s CDS spreads firmed more than 250 bps in the prior week.

Staples mostly flat

Staples’ 10¾% senior notes due 2027 (Caa2/CCC+) were mostly flat at 82 bid but improved from trading near the 75¾ range a week ago, a source said Thursday.

Meanwhile, Staples’ CDS spreads firmed 241 bps to 1,518 bps in the past week ended Wednesday, a source said.

The Framingham, Mass.-based office supply chain’s CDS spreads tightened 95 bps in the prior week.

Avaya pressured

Avaya’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) fell ½ point to 45¾ bid by Thursday afternoon, a market source said.

The bonds have dropped 10 points since the same session last week.

Avaya’s notes shed more than 7 points on Tuesday after the company reported additional weak preliminary third-quarter results.

S&P said Thursday it downgraded the company after Avaya Holdings Corp. disclosed its preliminary third-quarter results, internal investigations by its audit committee, delayed financial reporting, and that about $221 million of principal remains outstanding under its $350 million 2.25% convertible senior notes due June 15, 2023.

S&P said the new information suggests the company could undertake a debt restructuring or face a payment default over a much shorter time horizon than previously expected.

Fitch also downgraded Avaya on Thursday and noted the company completed financing in July to provide funds to repurchase or repay $350 million of the convertible notes, with $129 million repaid to date and the remainder of funds in escrow.

Moody’s downgraded the Durham, N.C.-based technology company on Tuesday.

Distressed index up

S&P U.S. High Yield Corporate Distressed Bond index total returns climbed on Wednesday.

One-day returns jumped to 1.05% from minus 0.18% on Tuesday and 0.79% on Monday.

Month-to-date total returns hit 2.99% on Wednesday versus 1.92% on Tuesday and 2.1% at the start of the week.

Year-to-date total returns were improved Wednesday at minus 18.3%, compared to minus 19.15% on Tuesday and minus 19% on Monday.

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