AMC notes gain in pre-holiday volume; Embarq, Lumen weaken; Rite Aid CDS spreads firm

By Cristal Cody

Tupelo, Miss., Nov. 23 – AMC Entertainment Holdings, Inc.’s bonds rallied about 2 points to more than 4 points with the paper attracting strong interest among lighter secondary activity on Wednesday.

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) were one of the day’s biggest gainers with the notes quoted up 3½ points to 4½ points on $38 million of trading volume.

Although the session was a full day, many participants treated Wednesday as an early close ahead of the Thanksgiving Day holiday. The bond markets are scheduled to close early on Friday.

Market focus over the session included the release of the Federal Reserve’s minutes from the Nov. 1-2 Federal Open Market Committee meeting, along with other economic data.

The Federal Reserve Bank of New York reported the weekly economic index for the week ended Nov. 19 declined to a 1.58% preliminary estimate from 1.71% for the week of Nov. 12.

The bank said the decrease was due to falls in steel production, tax withholding and railroad traffic and an increase in initial unemployment insurance claims, which offset increases in retail sales and consumer confidence.

Stock indices all moved higher on Wednesday and volatility continued to recede over the day.

The CBOE Volatility index fell 3.66% to $20.51.

The iShares iBoxx High Yield Corporate Bond ETF was up 41 cents, or 0.55%, at $75.15.

In other distressed market movers, Embarq Corp.’s bonds and credit default swap spreads weakened.

Embarq’s 7.995% notes due 2036 (Caa2/CCC/CCC) declined about 1¼ points over the day.

The company’s CDS spreads widened more than 150 basis points this week.

Former owner Lumen Technologies, Inc.’s CDS spreads also widened more than 125 bps for the week.

Rite Aid Corp.’s paper was mostly quiet on Wednesday as the drugstore chain posted results for its early tender for the 7½% senior secured notes due 2025, while its CDS spreads tightened a second consecutive week.

Fitch Ratings said in a note on Monday that defaults are “expected to pick up over the next few weeks with more out-of-court restructurings, which includes Rite Aid’s DDE [distressed debt exchange] for up to $200 million slated for Dec. 2, while Mountain Province Diamonds Inc. and Diebold Nixdorf Inc. announced DDEs that are expected to conclude by YE 2022.”

Distressed debt exchanges account for 58% of the year-to-date default volume and is led by Bausch Health Cos. Inc. and Diamond Sports Group LLC, Fitch said.

AMC bonds turn up

AMC’s notes reversed some losses on Wednesday, trading about 2 points to 4½ points higher in strong secondary action, a source said.

The company’s paper was down as much as 2 points-plus on Tuesday.

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) were one of the biggest gainers over the day.

The notes were quoted up 4½ points at 38 bid on $18.5 million of volume with the issue seen later in the session 3½ points higher at 37 bid on $19.5 million of supply.

On Tuesday, the notes dropped more than 1 point on over $6 million of trading.

AMC’s 7½% notes due 2029 (Caa1/B-) climbed 2 points to 57 bid by late afternoon on lighter trading totaling $8.6 million.

The previous day, the issue dropped nearly 2¾ points on more than $12 million of supply.

The Leawood, Kan.-based movie theater owner and gold and silver mine company’s bonds remained down about 3¾ points to more than 5 points from where the issues traded in the prior week.

Embarq, Lumen soft

Embarq’s 7.995% notes due 2036 (Caa2/CCC/CCC) declined about 1¼ points to a print of 41.40 on $3 million of paper turning over on Wednesday, a source said.

Embarq’s CDS spreads also widened 159 bps for the past week ended Wednesday to 997 bps, according to a Moody’s Investors Service report on Wednesday.

The Overland Park, Kan.-based telecommunications company was acquired by Connect Holding II LLC, doing business as Brightspeed, from Lumen Technologies.

Lumen’s CDS spreads also widened this past week ended Wednesday by 128 bps to 802 bps, according to the report.

Rite Aid mostly quiet

Rite Aid’s notes saw light trading on Wednesday after the company announced the results for its early tender offer for the 7½% senior secured notes due 2025, a source said.

The 7½% senior secured notes due 2025 (B3/CCC-/CCC) were last seen on Monday at 75 bid.

Rite Aid’s 8% bonds due 2026 (B3/CCC-/CCC) softened about ½ point to around 61 bid in thin supply on Wednesday.

The 7.7% senior bonds due 2027 (Caa2/CCC-/CCC) traded about 2 points better with a 56 handle during the session.

Rite Aid said Wednesday that about $160.5 million of the 2025 notes had been tendered in its offer to purchase up to $200 million of the bonds in cash.

Meanwhile, Rite Aid’s CDS spreads tightened for a second consecutive week, according to a Moody’s report.

CDS spreads firmed 176 bps for the week ended Wednesday to 3,390 bps.

Rite Aid’s CDS spreads had tightened 213 bps in the previous week after widening 104 bps the week prior.

The Camp Hill, Pa.-based drug retailer’s tender offer for the bonds expires Dec. 7.

Distressed index up

S&P U.S. High Yield Corporate Distressed Bond index one-day returns moved up to 0.17% on Tuesday versus minus 0.41% on Monday.

Month-to-date total returns rose to minus 0.54% from minus 0.72% on Monday.

Year-to-date total returns were improved at minus 26.08% on Tuesday, compared to minus 26.2% at the start of the holiday week.

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