Diamond Sports distressed paper moves lower; Qurate declines; Bausch Health gives back

By Cristal Cody

Tupelo, Miss., Jan. 20 – Diamond Sports Group LLC’s 5 3/8% senior secured notes due 2026 (Caa2/CCC-) fell ¾ point in trading on Friday that put it among the most active distressed bonds in the secondary.

Volume in the name hit $10 million.

Qurate Retail Inc. bonds also saw declines in active trading over the session.

The company’s credit default swap spreads have widened 800 basis points since November.

Qurate Retail’s 8¼% senior debentures due 2030 (B3/CCC) fell more than 1¾ points.

Subsidiary QVC Inc.’s notes were quoted 2 points higher on the day.

Bausch Health Cos. Inc. also was among the most active distressed names during the session, a source said.

The company’s paper was about ¼ point to 1½ points lower on more than $13 million traded.

Market tone reversed heading into the weekend after spending most of the week under pressure. The S&P 500 index closed up 1.89%.

The iShares iBoxx High Yield Corporate Bond ETF rose 12 cents, or 0.16%, to $76.14.

The CBOE Volatility index gave back 3.27% to head out at $19.85.

The distressed market is expected to stay busy in 2023 with projected default rates continuing to rise.

Fitch Ratings said a week ago that it raised the low end of its U.S. high-yield default forecast to 3% to 3½% from the 2½% to 3½% forecasted in December.

Moody’s Investors Service said in a report Thursday that the global speculative-grade default rate edged up to 2.8% for the trailing 12 months ended in December from 2.6% in November.

Moody's predicts that the global speculative-grade default rate will climb to 5.1% in 2023, above the historical average of 4.1%.

“Distressed exchanges will likely continue to be prevalent among U.S. defaulters, particularly for low-rated firms owned by private equity, for whom this default type is more common,” Moody’s said.

Both Bausch and Diamond Sports helped lead default volume in 2022 following distressed debt exchanges, according to Fitch.

Diamond Sports active

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa2/CCC-) went out down ¾ point at 7½ bid in a fairly busy session on Friday, a source said.

Secondary volume totaled $10 million.

The issue was last quoted trading on Nov. 28 at 17 bid.

In 2022, parent Sinclair Broadcast Group Inc. reported it deconsolidated the Chesapeake, Va.-based sports broadcast group from its financial statements.

Diamond Sports is “at risk of defaulting again, despite having completed a sizable distressed debt exchange in March 2022,” according to a Jan. 12 Fitch report.

Qurate moves lower

Qurate Retail’s paper also moved lower on Friday, a source said.

The 8¼% senior debentures due 2030 (B3/CCC) fell more than 1¾ points to the 45 bid area on more than $6.2 million of volume.

As previously reported, CDS spreads from the issuer, formerly known as Liberty Interactive Corp., widened 85 bps to 2,510 bps over the past week ended Wednesday, according to a Moody’s report.

CDS spreads in the West Chester, Pa.-based home shopping network owner have gapped out 800 bps since the end of November.

The company was downgraded a week ago by S&P Global Ratings based on declining customers in the third quarter and canceled orders due to major supply chain issues.

Subsidiary QVC’s notes were quoted higher on the day with the 5.45% senior secured notes due 2034 (Ba2/BB+) up 2 points at 59¼ bid.

Bausch softens

Bausch’s paper made up a chunk of distressed issues trading on Friday on more than $13 million of activity, a source said.

The 5¼% senior notes due 2030 (Ca/CCC/CC) slipped 1½ points to 47 bid on $3 million of volume.

Bausch’s 11% senior secured notes due 2028 (Caa1/B-/B) were more than ¾ point lower at 80¾ bid on more active trading totaling $5.2 million on Friday.

The Laval, Quebec-based health care and pharmaceutical company completed a distressed debt exchange in September.

Distressed returns moderate

S&P U.S. High Yield Corporate Distressed Bond index one-day returns slipped to minus 0.72% on Thursday from 0.52% on Wednesday and 0.28% in the first session of the holiday-shortened week.

Month-, quarter- and year-to-date total returns declined to 6.96% on Thursday from 7.74% mid-week and 7.18% on Tuesday.

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