Retail in focus; Bed Bath & Beyond gives back gains on bankruptcy talks; AMC weakens

By Abigail W. Adams

Portland, Me., Jan. 13 – The distressed debt space rounded out a strong week with continued strength on Friday with distressed credits well bid as investors bargain shop in the secondary space.

The S&P U.S. High Yield Corporate Distressed Bond index gained another 0.64% on Friday with year-to-date returns lifted to 6.56%.

The distressed debt index has now marked two consecutive weeks of gains with CCC credits outperforming as investors take advantage of deep discounts in the space.

While the risk-on sentiment has been strong over the past two weeks, market players are on recession watch with the retail sector in focus.

The sector has proven to be a mixed bag with Bed Bath & Beyond Inc.’s and Party City Holdings Inc.’s junk bonds plummeting on anticipated bankruptcy filings while other retailers’ junk bonds have been on strong uptrends.

Bed Bath & Beyond’s junk bonds gave back some gains after bouncing off their lows the previous two sessions as news reports circulate about talks with lenders ahead of a bankruptcy filing.

However, Rite Aid Corp.’s 8% senior secured notes due 2026 (B3/CCC-/B) were bid up in active trade after drifting lower throughout the week.

Staples, Inc.’s 10¾% senior notes due 2027 (Caa2/CCC+) were also on the rise in active trade.

Meanwhile, AMC Entertainment Holdings, Inc.’s junk bonds gave back some gains from its strong uptrend over the past week as meme stocks weakened.

Bed Bath gives back gains

After jumping off their lows over the past two session, Bed Bath & Beyond’s junk bonds resumed their decline as news circulated about the company’s talks with lenders ahead of a bankruptcy filing.

The 3.749% senior notes due 2024 (C/C) fell 1¼ points to close Friday at 9¾.

The notes had gained 6 points over the past week as stock skyrocketed in what appeared to be a meme-stock short squeeze.

They closed last Friday at 6 after the company warned of a potential bankruptcy filing.

News reports were circulating Friday about talks the company was holding with lenders ahead of filing for bankruptcy protection.

Bed Bath & Beyond was pursuing a stalking-horse bid with lenders ahead of a filing with Sycamore Partners one of the creditors the company was negotiating the sale of assets with, Reuters reported.

Retail rises

While the retail sector has already seen two distressed credits make moves toward bankruptcy, other credits have been on a strong uptrend as investors hunt out bargains in the space.

Rite Aid’s 8% senior secured notes due 2026 were on the rise in active trade after drifting lower in light volume throughout the week.

The 8% notes climbed 2 points to close Friday on a 49-handle.

They were changing hands in the 49 to 49½ context with the yield about 32%, a source said.

There was $6.5 million in reported volume.

While the notes posted gains day over day, they have been on a steady downtrend over the past two weeks despite the strength of the broader market.

The notes opened the week on a 52-handle, a source said.

Staples’ 10¾% senior notes due 2027 resumed their strong uptrend on Friday with the notes up 1 point to reclaim a 75-handle.

The notes were seen in the 75 to 75½ context heading into the market close with the yield 19½%.

There was $5 million in reported volume.

The notes opened last week on a 72-handle and have steadily climbed since, a source said.

AMC weakens

After a strong uptrend over the past week, AMC’s junk bonds gave back some gains on Friday.

The 10% senior secured second-lien notes due 2026 (Caa3/CC) fell back ½ point to close the day wrapped around 49 with the yield rising to 37 7/8%, a source said.

There was $10 million in reported volume.

The notes climbed 4 points over the past week.

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) fell 1 point to close Friday at 60½ with the yield 18 5/8%.

There was also $10 million in reported volume.

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