Embarq rallies; Avaya claws back 2½ points; distressed auto names active; Wheel Pros up

By Cristal Cody

Tupelo, Miss., Dec. 14 – Distressed paper from Embarq Corp. and Avaya Inc. topped the most active names in the secondary market on Wednesday.

Embarq’s 7.995% notes due 2036 (Caa2/CCC/CCC) climbed more than 4 points on nearly $19 million of volume.

Trading action in Avaya’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) ramped up with the bonds recovering 2½ points on $18 million of supply.

The issue sank 10½ points on Tuesday after the company reported critical discussions with stakeholders in its convertible bonds and term loans.

Market tone slipped following the Federal Reserve’s more modest interest rate hike.

The Federal Reserve raised the target range for the Federal Funds rate by 50 basis points to 4¼% to 4½% on Wednesday in hopes of taming inflation to the rate of 2% over the longer run.

The lower hike follows the Fed’s previous four consecutive rate hikes by 75 bps.

Back in March, the target range on the Federal Funds rate was ¼% to ½%.

The S&P 500 index fell 0.61%.

The iShares iBoxx High Yield Corporate Bond ETF declined 43 cents, or 0.56%, to $75.68.

Volatility was lower with the CBOE Volatility index off 6.25% at $21.14.

Elsewhere, some paper out of the automotive space was moving in the secondary market on Wednesday.

Tire maker Wheel Pros, Inc.’s 6½% senior notes due 2029 (Caa3/CCC-) shot up 9¼ points.

U.K.-based sports car manufacturer McLaren Holdings Ltd.’s 7½% senior secured notes due 2026 (Caa1/CCC) gave back 2 7/8 points.

Embarq moves higher

Embarq’s notes traded about 2 points to more than 4 points higher on Wednesday, a source said.

The 7.995% notes due 2036 (Caa2/CCC/CCC) rallied more than 4 points to hit 47 bid by the close.

Trading was heavy on $18.65 million of volume, putting it among the most active distressed names seen over the day.

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

Avaya notes up

Avaya’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) recovered 2½ points in heavy trading totaling $18 million on Wednesday, a source reported.

The bonds were quoted at 35 bid.

Avaya’s notes dropped 10½ points on Tuesday on $6.75 million of secondary volume after it reported discussions with holders of its convertible senior notes and term loans.

The Durham, N.C.-based technology company reported the previous day that it executed confidentially agreements in October, November and December 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, and the holders are not supportive of an out-of-court transaction.

Wheel Pros jumps

Wheel Pros’ 6½% senior notes due 2029 (Caa3/CCC-) shot up 9¼ points in light trading totaling $2 million on Wednesday, a source said.

The bonds went out at 34¼ bid and yielding more than 30%.

Wheel Pros is a Denver-based wheel, tire and suspension products manufacturer.

McLaren paper softens

McLaren’s 7½% senior secured notes due 2026 (Caa1/CCC) were quoted at 75 5/8 bid on Wednesday, a source said.

The bonds were down 2 7/8 points on $3 million of secondary action.

The notes were priced in a $620 million offering via McLaren Finance plc in July 2021 at par.

McLaren is a Woking, U.K.-based sports and race car automotive manufacturer.

Distressed returns climb

S&P U.S. High Yield Corporate Distressed Bond index one-day returns jumped to 1.21% on Tuesday from 0.28% at the start of the week.

Month-to-date total returns hit 2.2% on Tuesday after posting at 0.98% on Monday.

Year-to-date total returns also improved to minus 23.81% from minus 24.72% on Monday.

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