Kohl’s lower on junk status; Bed Bath & Beyond up; FedEx flounders; Transocean better

By Cristal Cody

Tupelo, Miss., Sept. 16 – Kohl’s Corp.’s 5.55% senior notes due 2045 (Baa2/BB+) fell 1point on Friday after S&P Global Ratings dropped the issuer and its bonds to junk.

Friday’s tone remained mostly soft and was helped by FedEx Corp. shares sinking more than 21% after the company reported after the markets closed on Thursday weak first-quarter results, announced plans to close over 90 locations and withdrew its full-year fiscal 2023 guidance.

FedEx’s paper was trading with handles as low as the 70s on Friday, a source said.

The company’s $750 million tranche of 3.25% notes due 2041 (Baa2/BBB), which priced in April 2021 at 99.604 to yield 3.277%, were quoted at 74½ bid to yield 5.44%.

NCR Corp.’s paper slid about 6 5/8 points to more than 13 points on over $41 million of secondary volume on Friday as one of the most active junk names, though yields were moving under 10%, a source said.

The 5% notes due 2028 (B3/B) were quoted down 9½ points at 81 bid and a 9.17% yield on more than $9 million of supply following NCR’s announcement on Thursday night that it plans to separate into two independent publicly traded companies.

Meanwhile, Bed Bath & Beyond Inc.’s 4.915% senior notes due 2034 (Caa3/CCC) improved more than 2 points on less than $1.5 million of paper traded on Friday.

Stock indices were lower with the S&P 500 index ending the day off 0.72% and the Nasdaq down 0.9%.

In the junk space, the iShares iBoxx High Yield Corporate Bond ETF rose 23 cents, or 0.31%, to $74.18.

Measured volatility was mostly flat with the CBOE Volatility index off 0.08% at 26.25.

Oil futures were little changed.

West Texas Intermediate crude oil benchmark futures for October deliveries settled up 1 cent at $85.11 a barrel.

Offshore driller Transocean Inc.’s notes softened but held onto some of the week’s gains after parent company Transocean Ltd. was downgraded on Friday.

Transocean’s 7½% senior notes due 2026 (Ca/CCC) declined 1¾ points on the day but were ending the week 2 points better.

Kohl’s paper declines

Kohl’s 5.55% senior notes due 2045 (Baa2/BB+) dropped 1 point in steady trading action on Friday to 68½ bid after the retailer was dropped to junk, a source said.

The notes were mostly unchanged on Thursday at the 69½ bid range, then off about ½ point on the week.

The bonds have declined from a 114 handle at the start of the year.

S&P said Friday it downgraded the issuer and the bond ratings to BB+ from BBB- based on expected weak operating performance.

Kohl’s CDS spreads widened more than 30 basis points over the past week ended Wednesday to 515 bps, according to a Moody’s Investors Service report on Thursday.

The Menomonee Falls, Wis.-based department store chain in July called off plans to place the company for sale.

Bed Bath & Beyond up

Bed Bath & Beyond’s 4.915% senior notes due 2034 (Caa3/CCC) improved more than 2 points to a print of 22.7 in light activity on Friday, a source said.

Secondary supply totaled less than $1.5 million in the tranche.

The company’s stock closed Friday down 8.76% at $8.02.

Bed Bath & Beyond’s paper has been under pressure with the company facing numerous issues, including a search for a new chief executive, the death of its chief financial officer earlier in September and the company’s plan announced in late August for strategic changes that includes closing stores.

The Union, N.J.-based home products retailer plans to release second-quarter results on Sept. 29.

Transocean in focus

Transocean’s 8% debentures due 2027 (C/CCC-) gave back about 1¾ points on Friday to trade at 77 bid by the close in mostly light trading action, a source said.

The notes were ending the week ½ point better.

Transocean’s 7½% senior notes due 2026 (Ca/CCC) declined 1¾ points over the session to 81 bid but were 2 points better on the week.

The Steinhausen, Switzerland-based offshore driller announced on Tuesday that it executed a privately negotiated bond exchange and purchase agreements that provides it with $175 million of liquidity.

The transactions are expected to close Sept. 30.

S&P said Friday it lowered Transocean Ltd. to CC from CCC- based on what it considers a distressed exchange equivalent to default.

Distressed returns soft

The S&P U.S. High Yield Corporate Distressed Bond index steadily softened over the first four sessions of the week.

On Thursday, the index had a level of 198.76, down from 198.97 on Wednesday, 199.34 on Tuesday and 201.85 on Monday.

One-day returns softened from 0.3% on Monday to minus 0.11% by Thursday.

On Wednesday, Prospect News incorrectly reported the session’s one-day, monthly and year-to-date total returns.

Month-to-date total returns also fell over the week to minus 1.17% on Thursday from 0.37% on Monday.

Year-to-date total returns were down at minus 22.02% on Thursday, compared to minus 20.81% at the start of the week.

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