Icahn paper slides toward distressed territory; Bed Bath & Beyond active; QVC declines

By Cristal Cody

Tupelo, Miss., May 11 – Paper from Icahn Enterprises LP moved closer to the distressed space on Thursday with its 5¼% senior notes due 2027 (Ba3/BB) down 5 points and trading on a handle in the 70s as secondary action soared.

Total volume across the issuer’s notes blew past $168 million as short seller Hindenburg Research published additional complaints following its May 2 report outlining issues with Icahn Enterprises.

Hindenburg said Thursday that Icahn responded to its report on May 4 “by failing to address any of the issues we raised, reiterating its $2 per quarter dividend and promising to address the issues later ‘at length.’”

Icahn Enterprises posted its first-quarter results on Wednesday.

“Perhaps most importantly, the company failed to disclose basic details of Carl Icahn’s margin loans, which we strongly suspect represent a near-term critical threat to IEP unitholders,” Hindenburg said. “We strongly suspect – based on our analysis that we had not previously published – that Carl Icahn has borrowed billions, and reinvested some, or all the proceeds, into his own investment funds. These funds subsequently generated significant losses.”

Hindenburg is the firm that also caused major headaches for Adani Group back in January and February after the short seller published a report regarding fraud allegations, as well as other companies such as Block Inc. in March.

Hindenburg Research said it is short units of Icahn Enterprises and has initiated a short position in IEP bonds.

Market volatility was little changed on the day with the CBOE Volatility index off 0.06% at 16.93.

The iShares iBoxx High Yield Corporate Bond ETF fell 12 cents, or 0.16%, to $74.69.

Distressed retail paper was active over the session.

Bankrupt Bed Bath & Beyond Inc.’s 5.165% senior notes due 2044 (/D) were moving in the secondary market on Thursday on nearly $6 million of trading,

Home shopping network QVC Inc.’s bonds declined about 1¼ points to more than 1½ points over the day.

In other distressed news on Thursday, Fitch Ratings reported the U.S. high-yield trailing 12-month default rate was 1.9% at the end of April, roughly in line with March’s 1.8% rate.

Fitch said it expects high-yield defaults to trend higher the rest of the year and forecasts a 3% to 3½% 2023 junk default rate.

The rating agency’s Top Market Concern Bond list increased in May to $53.3 billion from $50.6 billion in April.

“This is the largest total since May 2020 and is up substantially from $17.1 billion one year earlier,” Fitch noted.

Ten high-yield names were added to Fitch’s bond list in May, including QVC parent Qurate Retail Inc., formerly known as Liberty Interactive LLC, that was added due to a “low secondary bid.”

Icahn declines

Icahn Enterprises’ 5¼% senior notes due 2027 (Ba3/BB) dropped 5 points to trade as 79½ bid on Thursday, a source said.

Volume climbed to more than $31 million.

The notes have lost about 15 points since Hindenburg Research’s initial report was made May 2.

Icahn Enterprises disclosed on Wednesday it its 10-Q filing that the U.S. Attorney’s office for the Southern District of New York contacted it on May 3 for a range of documents, including governance, securities offerings and valuation.

“Our analysis, based on IEP’s filings, shows that despite Icahn’s investment funds generating 53% losses from 2014 to 2022-year end, Icahn’s personal investment increased, potentially owing to him drawing new cash from margin pledges which was then reinvested in the funds,” according to Hindenburg’s latest report on Thursday.

Icahn Enterprises’ other notes on Thursday were trading down about 1¾ points to over 3 points in heavy secondary supply.

The 4 3/8% senior notes due 2029 (Ba3/BB) shed 3 points to a quote of 74½ bid on more than $34 million of bonds changing hands.

Bed Bath & Beyond active

Bed Bath & Beyond’s 5.165% senior notes due 2044 (/D) were moving in the secondary market on Thursday on nearly $6 million of trading, a source said.

The long bonds were quoted at 2¾ bid.

Bed Bath & Beyond filed for Chapter 11 bankruptcy in April and has started liquidation to close all stores, though it intends to use the bankruptcy process to auction the company and its buybuy Baby assets.

The Union, N.J.-based home products retailer’s shares were suspended for trading by the Nasdaq Stock Market on May 3 after the equity dropped to pennies.

QVC softens

QVC’s 4 3/8% senior secured notes due 2028 (B2/B-/B+) gave back 1½ points by the day’s end to trade at 51 bid, a source said.

The notes saw $4.3 million of volume.

QVC’s 4.45% senior secured first-lien notes due 2025 (B2/B-/B+) dropped 1 5/8 points to 82 bid in lighter action totaling $1.9 million.

Parent West Chester, Pa.-based Qurate Retail’s credit default swap spreads tightened 269 basis points over the past week ended Wednesday to 3,297 bps, according to a Moody’s Investors Service report.

Distressed index up

S&P U.S. High Yield Corporate Distressed Bond index one-day returns turned positive on Wednesday, improving to 0.37% from minus 0.15% in the prior session.

Month-to-date total returns tightened to minus 0.06% from minus 0.43% on Tuesday.

Year-to-date total returns were higher at 7.27% on Wednesday versus 6.87% the previous day.

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