Avaya notes decline; Carvana paper higher on day; Carnival bonds, CDS spreads weaken

By Cristal Cody

Tupelo, Miss., Dec. 15 – Avaya Inc.’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) shed 1 point on Thursday in heavy trading that placed it as the most traded distressed issue seen in the secondary market.

The notes had recovered 2½ points on Wednesday following a 10½-point drop on Tuesday after the company reported critical discussions with stakeholders in its convertible bonds and term loans and weak fiscal 2022 guidance.

Avaya’s stock hit a new low of 50 cents during the session.

Carvana Co.’s bonds were making inroads after restructuring chatter hampered the paper in the prior week.

Carvana’s 10¼% senior notes due 2030 (Caa2/CCC) moved up 1¼ points on Thursday and were trading around 8 points better on the week.

Stocks tanked following 50 basis point rate hikes by the European Central Bank and Bank of England on Thursday, which followed the Federal Reserve’s interest rate increase of 50 bps on Wednesday.

The S&P 500 index closed down 2.49%.

The iShares iBoxx High Yield Corporate Bond ETF softened 28 cents, or 0.38%, to $75.

Volatility moved up. The CBOE Volatility index rose 7.66% to $22.76.

In other distressed secondary supply, Carnival Corp.’s notes traded about ½ point to more than 2 points weaker on Thursday.

The 10½% senior notes due 2030 (B2/B) declined more than 2¼ points.

Carnival’s credit default swap spreads also widened more than 50 bps this week.

Avaya moves lower

Avaya’s 6 1/8% senior secured notes due 2028 (Caa2/CCC-/CCC) traded down 1 point on Thursday to 34¼ bid and a yield of 31.6%, a source said.

Secondary activity was heavy with more than $12 million of volume that put the issue as the highest yielding bond seen traded over the session.

In the prior session, Avaya’s notes had recovered 2½ points on $18 million of supply after declining 10½ points on Tuesday on $6.75 million of volume.

Secondary action in the paper picked up after Avaya on Tuesday reported that it executed confidentially agreements in October, November and December with certain holders of its convertible senior notes and term loans.

The Durham, N.C.-based technology company 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.

The company also on Tuesday reported that third-quarter GAAP revenue was 17% below guidance and said GAAP revenue is expected to decline to $2.47 billion in fiscal 2022 from $2.97 billion in 2021.

The company reported a $1.75 billion loss in the quarter ended June 30.

As of Sept. 30, the company said it had $253 million of cash and an undrawn ABL facility.

Avaya said it is pursuing several “levers” to enhance liquidity, including the receipt of $385 million of new money in January 2023 and the receipt of $50 million from an IP monetization transaction set to close in the fourth quarter of fiscal 2023.

Avaya’s stock closed Thursday down 12.53% at 51 cents, well off the 52-week high of $21.65. Shares hit a 52-week low of 50 cents earlier in the session.

Carvana notes up

Carvana’s 10¼% senior notes due 2030 (Caa2/CCC) moved up 1¼ points to 50¼ bid on $12 million of supply on Thursday, a source said.

The bonds have improved about 8 points from a week ago when the issue was quoted trading with a 42 handle.

Carvana sold $3.28 billion of the notes at par on April 27, 2022.

The company’s target stock price was cut to $1 in the prior week by Wedbush Securities on growing chances of a restructuring following news reports that a majority group of creditors signed an agreement to cooperate in restructuring negotiations.

Carvana's stock also has improved since plunging more than 40% in the prior week.

The Phoenix-based online car retailer’s stock improved 4% on Thursday to $5.47.

Carnival softens

Meanwhile, Carnival’s notes traded down about ½ point to more than 2 points on Thursday, while its CDS spreads widened this week, sources said.

Carnival’s 5¾% notes due 2027 (B3/B) dropped about ½ point to head out with a 73 handle and some change on more than $11.5 million of secondary action during the session.

The 10½% senior notes due 2030 (B2/B) declined more than 2¼ points to go out at 82½ bid on $4.3 million of trading activity.

The Miami-based cruise operator’s CDS spreads also widened 68 bps over the past week ended Wednesday to 1,438 bps, according to a Moody’s Investors Service report.

Distressed index lower

S&P U.S. High Yield Corporate Distressed Bond index one-day returns declined but remained positive on Wednesday at 0.21% versus 1.21% on Tuesday and 0.28% at the start of the week.

Month-to-date total returns improved to 2.41% on Wednesday, compared to 2.2% on Tuesday and 0.98% on Monday.

Year-to-date total returns rose to minus 23.65% from minus 23.81% on Tuesday and minus 24.72% on Monday.

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