Revlon trades after plan preview; Sears paper attracts distressed interest; Emergent up

By Cristal Cody

Tupelo, Miss., Dec. 19 – Secondary trading stayed light on Monday in the riskiest of credits in the final week ahead of Christmas.

A handful of distressed names were active, sources reported.

Revlon Inc.’s notes were the “second most active” after the bankrupt company came out with a preview of a plan that wasn’t favorable to bonds, a source said.

Revlon, which filed for Chapter 11 bankruptcy in June, said it signed a restructuring support agreement with pre-petition lenders.

Market tone was mostly weak with stock indices down. The Nasdaq dropped 1.49%.

The iShares iBoxx High Yield Corporate Bond ETF declined 38 cents, or 0.51%, to $74.22.

Volatility was little changed. The CBOE Volatility index softened 0.88% to $22.42.

Another bankrupt name also was moving in the secondary market on Monday.

“The most active name, strangely, is the Sears bond,” a source said. “The 8% of ’19. I don’t know what the expectation is there.”

Sears Hometown Stores, Inc. filed Chapter 11 bankruptcy in the prior week.

Emergent BioSolutions Inc.’s 3 7/8% guaranteed senior notes due 2028 (Caa1/B) also were active on nearly $12 million of secondary volume on Monday, a source said.

The bonds were quoted up 1¾ points at 39 bid.

The Gaithersburg, Md.-based life sciences company sold $450 million of the notes on Aug. 4, 2020 at par.

Revlon bonds active

Revlon Consumer Products Corp.’s 6¼% senior notes due 2024 were “hovering around” 5 bid, a source said Monday.

The bonds have dropped from the 12 bid area seen back in late August.

Revlon reported in a regulatory filing that it entered into a restructuring support agreement on Monday with certain parties.

According to the agreement, Revlon is considering an equitization restructuring or alternative sale transaction that would repay in full and in cash all term B-2 loan claims and term B-2 loan claims from a 2020 credit agreement.

Revlon is expected to file its plan and disclosure statement by Dec. 22 with plan confirmation anticipated for April 2023.

The New York-based hair color products and cosmetics company filed for Chapter 11 bankruptcy on June 15 in the U.S. Bankruptcy Court for the Southern District of New York.

Sears moves in secondary

Sears Holding Corp.’s 8% notes due Dec. 15, 2019 were trading between 2 and 3 bid over the session, a source said.

“I’m not really sure where there is any value to that, but they were active,” the source said of Sears’ bonds. “I don’t think any money’s going to make it to the bonds, so I’m a little surprised.”

Sears Hometown Stores filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Dec. 12.

The company was spun off from Sears Holdings in 2012. Sears Holdings was purchased out of bankruptcy by Transform Holdco LLC, which also acquired Sears Hometown Stores in 2019.

Sears Hometown reported it reached out to potential strategic buyers back in January to assess interest.

By mid-October, the debtors were in breach of a covenant under their $27.5 million revolving credit agreement with PNC Bank, NA.

The retailer is based in Hoffman Estates, Ill.

Distressed index lower

S&P U.S. High Yield Corporate Distressed Bond index one-day returns remained soft on Friday at minus 0.76%, compared to minus 0.65% on Thursday, 0.21% on Wednesday, 1.21% on Tuesday and 0.28% at the start of the prior week.

Month-to-date total returns fell to 0.97% at the week’s end from 1¾% on Thursday, 2.41% on Wednesday, 2.2% on Tuesday and 0.98% in the Dec. 12 session.

Year-to-date total returns ended Friday at minus 24.73%, down from minus 24.14% on Thursday, minus 23.65% on Wednesday, minus 23.81% on Tuesday and minus 24.72% in the first session of the week.

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