Bed Bath & Beyond climbs as earnings point to bankruptcy; Coinbase gains on cost cuts

By Abigail W. Adams

Portland, Me., Jan. 10 – It was another strong day for the distressed debt space with the beaten down credits of 2022 enjoying a temporary reprieve amid a New Year buying spree.

The S&P U.S. High Yield Corporate Distressed Bond index gained another1.18% on Tuesday with year-to-date gains now 4.28%.

Credit markets have ripped in the New Year with CCC credits the outperformers, a source said.

While the broader market remained well bid, attention in the thinly traded distressed debt space belonged to the default candidates of 2023.

Bed Bath & Beyond Inc.’s junk bonds climbed for the second consecutive session with a bankruptcy filing widely anticipated, especially after a large earnings miss.

Attention was now turning to recovery prospects in a bankruptcy proceeding, a source said.

Coinbase Global, Inc.’s junk bonds (Ba2/BB) were on the rise in heavy volume as the crypto exchange enacted fresh cost-cutting measures that includes the elimination of 20% of staff.

Bed Bath & Beyond climbs

Bed Bath & Beyond’s junk bonds posted their second consecutive day of gains on Tuesday as the ailing retailer posted a larger-than-expected third-quarter loss.

The 3.749% senior notes due 2024 (C/C) climbed another 1 point to close Tuesday wrapped around 8, a source said.

The notes have gained 2 points over the past two sessions after plunging 16 points the previous week after the company issued a bankruptcy warning.

Bed Bath & Beyond’s earnings did little to change the prognosis with the company missing analyst expectations by a wide margin.

The retailer posted revenue of $1.26 billion versus expectations for revenue of $1.34 billion.

Adjusted EBITDA was negative $225 million and operating cash flow was negative $307.6 million.

While there was little doubt that a bankruptcy filing was imminent, the market’s focus was shifting to the amount that could be gleaned in recovery.

S&P Global Ratings raised the rating for Bed Bath & Beyond’s senior unsecured notes to C from D on Tuesday with the recovery rating on the notes 6, the lowest ranking on the scale, Prospect News reported.

Coinbase gains

Coinbase’s junk bonds were on the rise on Tuesday after the company announced a variety of cost-saving measures which included mass layoffs.

Coinbase’s 3 3/8% notes due 2028 gained 2 points to close Tuesday on a 58-handle.

The notes were changing hands in the 58 to 58¼ context heading into the market close with the yield 14 3/8%, according to a market source.

The notes saw heavy volume with $14 million on the tape.

The notes have climbed 4 points over the past two sessions.

The crypto exchange’s 3 5/8% senior notes due 2031 rose 1 point to close Tuesday wrapped around 52 with the yield just shy of 13%.

The notes have climbed 2 points over the past two sessions.

Coinbase was again in focus on Tuesday after the crypto exchange announced a variety of cost-savings measures, which included laying off 20% of its staff.

The cost-savings measures will reduce the company’s operating expenses by 25%, the Wall Street Journal reported.

Coinbase was under pressure last week as bankruptcy news continued to swirl around the industry in the wake of crypto exchange FTX’s spectacular collapse in November.

Crypto lender Genesis Global Trading Inc. announced last week it was considering filing for bankruptcy protection.

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