Rite Aid paper down, CDS spreads gap out; Mallinckrodt drops; iHeartMedia, DISH mixed

By Cristal Cody

Tupelo, Miss., June 15 – Rite Aid Corp.’s bonds continued to drift lower in distressed secondary trading on Thursday while its credit default swap spreads gapped out this week.

The company’s paper has declined about 3 points to 5 points since Monday ahead of its earnings release later in June.

“There’s a number of headwinds for fiscal 2024,” a trader said.

The 8% senior secured notes due 2026 (Caa3/CCC-/CCC) shed about 3 points.

Rite Aid’s CDS spreads blew past 7,000 basis points after widening more than 1,300 bps this week.

Mallinckrodt plc’s paper moved lower in mostly light trading after the company chose not to pay debt payments on its 10% second-lien note due 2025 and 11½% first-lien senior secured note due 2028.

The issuer reported Thursday in a regulatory filing that it is analyzing “its situation” as the company faces another bankruptcy after it scrambled to pay off an opioid-related settlement during the session and skipped payments on the two bonds.

“Their debt is trading flat now,” a source said. “They just came out of bankruptcy less than a year ago.”

Mallinckrodt’s 10% second-lien notes due 2025 (Caa1/CCC+) have dropped about 10 points since Monday.

iHeartMedia, Inc.’s notes have been soft in the secondary market but appeared to have “stabilized,” a trader said.

The 8 3/8% senior notes due 2027 (Caa1/B-) have declined more than 2 points since Monday, while the 6 3/8% senior secured notes due 2026 (B1/BB-) fell about ½ point this week.

Meanwhile, iHeartMedia’s CDS spreads continued to tighten a second week after widening in May. Spreads were nearly 400 bps tighter for the week.

“They’ve rebounded a bit,” the source reported.

Overall trading action remained quiet on Thursday ahead of the long holiday weekend.

“The distressed space looks pretty quiet,” a trader noted.

Market tone was strong over the session with stock indices up after the Federal Reserve kept rates unchanged on Wednesday.

The S&P 500 index closed 1.22% higher.

The iShares iBoxx High Yield Corporate Bond ETF added 35 cents, or 0.47%, to $75.11.

Market volatility remained elevated. The CBOE Volatility index rose 4.54% to 14.51.

DISH Network Corp.’s paper was among the most active names traded on Thursday, while CDS spreads from the company softened more than 100 bps this week, sources said.

The company’s bonds were trading about 1¾ points to 3 points better on the week.

Rite Aid weakens

Rite Aid’s paper “already was a little sloppy” before moving lower this week, a source said Thursday.

The 8% senior secured notes due 2026 (Caa3/CCC-/B) went out around 51½ bid, 52½ offered, down from around 54, 55 on Monday.

Rite Aid’s 7.7% senior bonds due 2027 (Ca/CCC-/CC) also softened to 26 bid, 27 offered over the session from the 31 bid to 33 bid range at the week’s start.

The retailer’s CDS spreads gapped out 1,301 bps this week ended Wednesday, according to a Moody’s Investors Service report.

CDS spreads were 7,326 bps as of Wednesday.

Rite Aid plans to release the results for its fiscal 2024 first quarter ended June 3 on June 29.

The Camp Hill, Pa.-based drugstore chain’s stock (NYSE: RAD) closed 3.98% better on the day at $1.83.

Mallinckrodt declines

Mallinckrodt’s 10% second-lien notes due 2025 (Caa1/CCC+) went out at 14 bid, 16 offered, a trader said.

The issue moved Monday at 25 bid, 27 offered and with a 78 handle on June 5.

The 11½% first lien senior secured notes due 2028 (Caa1/CCC+) also traded Thursday at 84¼ bid, another source added.

Mallinckrodt said Thursday in a regulatory filing that the board elected not to pay the interest payments due on both bonds and has 30 days before defaults are declared.

Instead, the company said it made the required $16.5 million payment due Thursday as part of its opioid-related settlement reached with federal authorities last year.

Mallinckrodt said it is required to pay a total of $260 million to the Department of Justice and other parties over seven years.

The company reported that it is considering options, including bankruptcy.

The Dublin-based pharmaceutical company last exited Chapter 11 bankruptcy on June 16, 2022.

iHeartMedia mixed

iHeartCommunications, Inc.’s 8 3/8% senior notes due 2027 (Caa1/B-) were quoted trading Thursday at 68¼ bid, 69¼ offered, a source said.

The issue was down about 1½ points on the day on $8 million of trading.

The notes have declined from 70¾ bid, 71¾ offered on Monday and where it went out in the prior week at 70¾ bid.

iHeartMedia’s 6 3/8% senior secured notes due 2026 (B1/BB-) were stronger on the week at 85 bid, 86 offered, the source said.

The secured notes traded Monday at 84½ bid, 85½ offered and were as low as the 76, 77 context on June 1.

iHeartCommunications’ CDS spreads came in 384 bps to 1,474 bps for the week ended Wednesday, Moody’s said.

The company’s CDS spreads tightened 435 bps in the prior week.

iHeart’s CDS spreads had widened more than 500 bps over May.

The San Antonio-based media broadcasting company’s stock (Nasdaq: IHRT) finished 3.62% higher on Thursday at $3.72.

DISH active

DISH’s 5 7/8% senior notes due 2024 (B3/B-) added 1 point to 86½ bid on more than $9 million of trading on Thursday, according to market sources.

“On Monday, they were 83½, 84½, so they’re up a little bit on the week,” one source said.

DISH DBS Corp.’s 7¾% senior notes due 2026 (B3/B-) were quoted Thursday at 59½ bid, 60½ offered, improved from trading at 57½ bid, 58½ offered at the week’s start.

The company’s bonds have been mixed in June on a range of speculative news reports, including last week that it was struggling to raise cash to fund its 5G network and the week prior about a potential wireless carrier deal with Amazon.com Inc.

CDS spreads for both DISH Network and DISH DBS widened more than 100 bps this week after improving in the prior two weeks, Moody’s said Thursday.

DISH Network’s CDS spreads eased 112 bps to 2,221 bps for the weekly period ended Wednesday.

CDS spreads for DISH DBS widened 126 bps over the period to 2,505 bps.

The Englewood, Colo.-based satellite cable operator’s stock (Nasdaq: DISH) closed off 1.11% at $6.24.

Distressed returns dip

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns softened on Wednesday to 0.47% from 0.6% on Tuesday but remained up from 0.28% on Monday.

Month-to-date total returns improved midweek to 4.61% versus 4.12% on Tuesday and 3½% at the start of the week.

Year-to-date total returns were higher on Wednesday at 11.56%, compared to 11.04% on Tuesday and 10.37% on Monday.

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