Avaya notes edge up, stock drops; Global Medical Response weak; Diamond Sports declines

By Cristal Cody

Tupelo, Miss., Nov. 30 – Avaya Holdings Corp.’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) gained ½ point in thin secondary supply on Wednesday following the company’s report of “material weaknesses” in its internal control over financial reporting.

The company’s stock closed down more than 13%.

Market tone remained strong through the finish with stock indices rallying as much as 4.41%. The S&P 500 index finished up 3.09%.

The iShares iBoxx High Yield Corporate Bond ETF added $1.12 or 1.5%, to $75.66.

Measured volatility was lower. The CBOE Volatility index fell 6.17% to $20.54.

January crude oil climbed. West Texas Intermediate crude oil benchmark futures for January delivery settled up $2.35 at $80.55 a barrel.

Global Medical Response Inc.’s bonds have been sinking steadily since August and remained soft on Wednesday following a downgrade from S&P Global Ratings based in part on inflation pressures from fuel costs.

The 6½% senior secured notes due 2025 (B2/B-) have given back about 20 points since August.

In other distressed paper, Diamond Sports Group LLC’s 5 3/8% senior secured notes due 2026 (Caa2/CCC-) were down about 1½ points since the start of the week.

Avaya slightly higher

Avaya Inc.’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) rose ½ point to 44½ bid in thin secondary action on Wednesday, a source said.

The issue was ending November up about 1½ points.

The bonds were last seen in August with a handle in the high 50s after sinking to the 30s earlier in the month.

Avaya said Wednesday in an 8-K filing with the Securities and Exchange Commission that on Monday it “determined that control deficiencies that management had been reviewing represent material weaknesses” in its internal control over financial reporting.

The company cited that management's assessment of the reporting in its fiscal 2021 10-K filing regarding the company’s whistleblower log policy should no longer be relied upon.

Avaya’s paper came under pressure in August on weak preliminary third-quarter results, credit ratings downgrades and the company’s report of internal investigations by its audit committee.

The Durham, N.C.-based technology company said Wednesday the audit committee has undertaken investigations into other matters that are not yet complete.

Avaya’s stock closed down 13.75% to 97 cents, on the far side of a 52-week high of $21.65.

Global Medical soft

Global Medical Response’s 6½% senior secured notes due 2025 (B2/B-) have held mostly steady in November after the paper declined from the low to mid 90s in August to an 80s handle in September and the 70s range in October, a source said.

The bonds were off more than ¼ point from the prior day and ending November more than 2 points lower at the 75¼ bid area.

S&P on Tuesday lowered the ratings on the company and the first-lien secured debt to B- from B based on inflation pressures, including from wages and fuel costs.

Global Medical Response is a Greenwood Village, Colo.-based medical transportation firm.

Diamond Sports lower

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa2/CCC-) were quoted trading Wednesday at the 15½ bid area, down about 1½ points from Monday, a source said.

The company reported at the start of the week heavy third-quarter losses and lower revenue.

Parent Sinclair Broadcast Group Inc. announced earlier in 2022 that it deconsolidated the Chesapeake, Va.-based sports broadcast group from its financial statements.

Diamond Sports is among the issuers leading default volume this year with distressed debt exchanges accounting for nearly 60% of the year-to-date default volume, according to Fitch Ratings.

Distressed returns drop

S&P U.S. High Yield Corporate Distressed Bond index one-day returns fell on Tuesday to minus 0.34% from 0.11% on Monday.

Month-to-date total returns edged lower on Tuesday to 0.05% from 0.39% on Monday.

Year-to-date total returns softened to minus 25.43% from minus 25.38% at the start of the week.

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