Distressed retail paper up in heavy trading; Staples, Michaels improve; Avaya slides

By Cristal Cody

Tupelo, Miss., Dec. 13 – Distressed retail paper got a lift on Tuesday as November inflation slowed more than expected.

Staples, Inc.’s 10¾% senior notes due 2027 (Caa2/CCC+) grabbed the bulk of distressed secondary action with the issue rallying 4 points on more than $21 million of volume.

Two tranches of Michaels Cos., Inc.’s paper traded more than 3 points to nearly 6 points higher on Tuesday on more than $40 million of secondary supply, a source said.

The 7 7/8% senior notes due 2029 (Caa1/CCC) jumped more than 3 points on trading totaling nearly $17 million.

Markets welcomed the news that inflation improved more than expected in November.

The iShares iBoxx High Yield Corporate Bond ETF picked up 78 cents, or 1.04%, to $76.11.

The CBOE Volatility index receded 9.8% by the day’s end to $22.55.

The Labor Department reported Tuesday that the U.S. Consumer Price Index rose 0.1% in November on a seasonally adjusted basis after increasing 0.4% in October. The index has increased 7.1% over the last 12 months, down from a 7.7% increase through October and below estimates of a 7.3% increase for November.

Focus now is on the Federal Reserve’s rate decision due Wednesday with market participants predicting a hike of 50 basis points following four consecutive increases of 75 bps each.

In other distressed paper, Avaya Inc.’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) sank 10½ points in light activity after the company reported discussions with stakeholders in its convertible bonds and term loans.

Staples paper higher

Staples’ 10¾% senior notes due 2027 (Caa2/CCC+) rallied 4 points to trade at 77¼ bid in strong trading supply on Tuesday, a source said.

Secondary volume in the name totaled $21.5 million.

The Framingham, Mass.-based office supply chain’s issue traded at 96½ bid in January.

Michaels moves up

Michaels’ 7 7/8% senior notes due 2029 (Caa1/CCC) climbed more than 3 points to 68 bid on more than $16.75 million of volume on Tuesday, a source said.

The issue traded with a handle in the high 50s on Friday.

Michaels sold 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 in April 2021 by funds managed by Apollo Global Management, Inc. affiliates following a cash tender offer for Michaels’ stock.

Avaya notes drop

Avaya’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) dropped 10½ points by the time the dust settled Tuesday after it reported discussions with holders of its convertible senior notes and term loans, a source said.

The issue was quoted at 32 bid on $6.75 million of secondary volume.

The bonds have declined more than 20 points since late August.

Avaya said in a regulatory filing that it executed confidentially agreements in October, November and this month with certain holders of its convertible senior notes and term loans.

Avaya said that it has not reached an agreement on terms of a transaction with holders of the notes and term loans. The group is not supportive of an out-of-court transaction, according to the notice.

The Durham, N.C.-based technology company previously reported internal investigations underway by its audit committee.

Distressed index higher

S&P U.S. High Yield Corporate Distressed Bond index one-day returns improved on Monday to 0.28% from 0.26% on Friday and 0.27% in the same session a week ago.

Month-to-date total returns rose to 0.98% on Monday from 0.7% on Friday but still off the 1.16% level in the week-ago session.

Year-to-date total returns were at minus 24.72% on Monday, compared to minus 24.93% on Friday and minus 24.58% in the Dec. 5 session.

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