Carvana bonds jump; Rite Aid higher, CDS spreads widen; iHeartMedia notes, CDS better

By Cristal Cody

Tupelo, Miss., June 8 – Bonds from Carvana Co. posted significant gains on Thursday in light secondary action, while its stock soared 56% in heavy trading after the company reported an improved second-quarter outlook.

The company’s senior notes were trading more than 7 points better going out the door.

Carvana’s 10¼% senior notes due 2030 (Ca/C) rallied 7¾ points.

Also in the distressed space, Rite Aid Corp.’s 8% senior secured notes due 2026 (Caa3/CCC-/CCC) were 1 point better on Thursday, while the drugstore chain’s credit default swap spreads moved out to more than 6,000 basis points this week.

Market tone was stronger with stock indices all up ½% or more on the day.

The iShares iBoxx High Yield Corporate Bond ETF recovered 47 cents, or 0.63%, to $74.70.

The “Fear Factor” index receded further on Thursday to its lowest levels post-pandemic.

The CBOE Volatility index declined 1.94% to 13.67.

iHeartMedia, Inc.’s bonds and CDS spreads saw strong gains over the day and week.

The 8 3/8% senior notes due 2027 (Caa1/B-) were trading about 10 points better from a week ago.

Carvana climbs

Carvana’s 10¼% senior notes due 2030 (Ca/CCC-) rallied 7¾ points to a quote of 78¾ bid on Thursday, a source said.

Trading was steady on $5.5 million of volume.

The issue has recovered more than 20 points from where it traded in March.

Carvana’s 5 5/8% senior notes due 2025 (Caa2/CCC-) also climbed over 7 points on Thursday to 86 bid in lighter trading totaling $3.3 million.

The company reported during the session that it expects adjusted EBITDA of above $50 million in the second quarter and non-GAAP total gross profit per unit to be above $6,000, which would be a new company record and an over 63% improvement compared to the second quarter of 2022.

Carvana reported June 2 that it terminated its exchange offer for five series of notes after the minimum participation condition of $500 million of tendered notes was not met.

S&P Global Ratings upgraded the issuer and the notes on Tuesday in response to the expiration and termination of the exchange offers, though it noted the potential for “another attempt” at a distressed exchange or other capital restructuring.

The Tempe, Ariz.-based online car retailer’s stock (NYSE: CVNA) soared 56% on Thursday to $23.23 on 173 million shares traded.

Rite Aid mixed

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/CCC) traded 1 point better over the day to 54¼ bid, a source said.

Meanwhile, the retailer’s CDS spreads widened 206 bps for the week ended Wednesday to 6,025 bps, according to a Moody’s Investors Service report.

The Camp Hill, Pa.-based drugstore chain’s stock (NYSE: RAD) was flat on the day at $1.88.

iHeartMedia stronger

iHeartCommunications, Inc.’s 8 3/8% senior notes due 2027 (Caa1/B-) picked up 2 more points on $8.84 million of paper traded on Thursday, a source said.

The bonds were quoted near the 68 bid area, about 10 points better from where the issue traded a week ago.

iHeartCommunications’ CDS spreads took back some of May’s weakness by closing out Wednesday 435 bps tighter on the week at 1,858 bps, Moody’s said.

CDS spreads for the issuer had widened more than 500 bps over the prior three weeks.

The San Antonio-based media broadcasting company’s stock closed down 0.53% at $3.76.

Distressed returns higher

S&P U.S. High Yield Corporate Distressed Bond index one-day returns improved midweek to 0.26% from 0.19% on Tuesday but remained down from 0.47% at the start of the week.

Month-to-date total returns continued to grow to 2.15% on Wednesday, compared to 1.89% on Tuesday and 1.69% on Monday.

Year-to-date total returns moved up to 8.94% midweek versus 8.65% on Tuesday and 8.45% at the week’s start.

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