Distressed notes from retailers Michaels, Bed Bath & Beyond soften; Staples improves

By Cristal Cody

Tupelo, Miss., Oct. 24 – Declines in paper from distressed retailers mostly persisted on Monday, while other sectors relating to consumer purchases also remained under pressure.

Michaels Cos., Inc.’s 7 7/8% senior notes due 2029 (Caa1/CCC) continued to take a beating with the notes down 1½ points from Friday.

Bed Bath & Beyond Inc.’s short-dated notes have given back nearly 10 points since the company announced exchange offers the previous week.

The 3.749% senior notes due 2024 (C/CC) dropped about 1¾ points on Monday.

Staples Inc.’s 10¾% senior notes due 2027 rose slightly in thin trading with the notes up more than ¼ point from Friday and ¾ point better from a week ago.

Markets generally were stronger over the day with stocks leading higher.

The iShares iBoxx High Yield Corporate Bond ETF improved 5 cents, or 0.07%, to $72.54.

Market volatility was little changed. The CBOE Volatility index rose 0.74% to 29.91.

Meanwhile, cinema advertising company National CineMedia, LLC’s 5¾% senior notes due 2026 (Caa3/CC) were trading down more than 5 points from a week ago and about 15 points lower since the end of September.

The company missed $11 million of coupon payments in the prior week.

In other distressed market action, S&P Global Ratings said in a report on Monday that the consumer products sector in the United States and Canada is the “most exposed to default risk” as ratings deteriorate and consumer spending declines.

The report notes that 90% of U.S. and Canadian consumer products issuers rated B- and below have a negative outlook or are on CreditWatch, while the number of CCC+ and below issuers are expected to increase in the fourth quarter.

Michaels paper declines

Michaels’ 7 7/8% senior notes due 2029 (Caa1/CCC) shed 1½ points to 53½ bid in mostly light trading by the afternoon, a source said Monday.

The bonds ended the prior week down about 1 point and were trading nearly 10 points weaker from a month ago.

S&P downgraded the notes on Oct. 14 following a soft second quarter.

Michaels issued the notes via Magic Mergeco Inc. in a $1.3 billion offering in April 2021 at par.

The Irving, Tex.-based arts and crafts retailer was taken private that month by funds managed by Apollo Global Management, Inc. affiliates following a cash tender offer for Michaels’ stock.

Bed Bath & Beyond soft

Bed Bath & Beyond’s paper was flat to weaker over the day with the short-dated notes down nearly 10 points since the company announced exchange offers the previous week, a market source said.

The 3.749% senior notes due 2024 (C/CC) were quoted at 19¼ bid, down about 1¾ points from ahead of the weekend and weaker than where the notes were quoted on Wednesday at 28 bid.

The retailer’s other two tranches, including the 4.915% senior notes due 2034 (C/CC), were trading little changed with a 12 handle on Monday but down about 1 point to 2 points from midweek.

Bed Bath & Beyond announced on Oct. 18 offers to exchange the company’s bonds for new second-lien and third-lien debt.

The exchange offers follow the retailer’s steep second-quarter losses reported in September.

The Union, N.J.-based home products retailer is underway in a search for a new chief executive and strategic changes that include closing stores.

Staples notes improve

Office supplies retailer Staples’s 10¾% senior notes due 2027 (Caa2/CCC+) traded at 72¼ bid in thin supply during Monday’s session, up more than ¼ point from Friday and ¾ point better from a week ago, a market source said.

The Framingham, Mass.-based office supply chain’s paper remains down from a 90s handle at the start of the year.

CineMedia weakens

National CineMedia’s 5¾% senior notes due 2026 (Ca/CC) moved Monday in the 7¼ bid to 7 bid area in light trading, a source said.

The notes have declined more than 5 points from a week ago and about 15 points since the end of September.

National CineMedia’s 5 7/8% senior secured notes due 2028 (Caa2/CCC) were last seen trading on Thursday down about 10 points on the week at 46 bid.

The Centennial, Colo.-based cinema advertising company missed $11 million of interest payments due on Oct. 15 and has entered into a 30-day grace period, according to a Fitch Ratings report on Monday.

Distressed returns widen

S&P U.S. High Yield Corporate Distressed Bond index one-day returns finished weaker on Friday at minus 0.57%, compared to minus 0.23% on Thursday, minus 0.96% on Wednesday, 0.43% on Tuesday and 0.58% at the prior week’s start.

Month-to-date total returns fell to minus 1.39% at the end of the week versus minus 0.83% on Thursday, minus 0.6% on Wednesday, 0.36% on Tuesday and minus 0.07% in the first session of the week.

Year-to-date total returns declined on Friday to minus 27.24% from minus 26.65% on Thursday and minus 26.26% at the week’s start.

© 2015 Prospect News.
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