Lumen, Level 3 little changed; iHeartMedia improves; AMC flat; distressed returns down

By Cristal Cody

Tupelo, Miss., June 26 – Lumen Technologies, Inc.’s 4% senior secured notes due 2027 (B3/BB-) were little changed on Monday in strong trading that topped $10 million, putting the bonds among the most active junk and distressed issues on the tape, a source said.

Paper from Lumen subsidiary Level 3 Financing, Inc. also was active over the session.

Lumen’s stock rallied nearly 10% on the day.

Market tone was mixed on Monday.

The S&P 500 index finished down 0.45%.

The iShares iBoxx High Yield Corporate Bond ETF edged up 4 cents, or 0.05%, to $74.23.

The CBOE Volatility Index rose 6.03% over the day to 14.25.

The U.S. economy continues to run too hot, according to a S&P Global Ratings report on Monday.

“Despite 500 basis points of official rate hikes in just over a year, output remains above potential, the labor market is tight, and inflation is too high," S&P global chief economist Paul Gruenwald said in a release.

The necessary slowdown in activity means that policy rates will likely need to go higher and stay there for longer, according to the report.

“The main risk to our forecast is that demand and growth may be stickier than anticipated, leading to more rate hikes and/or higher rates for longer,” S&P said. “This will cause more damage to interest rate-sensitive sectors and asymmetrically affect credit conditions.”

Market participants are anticipating two more rate hikes this year.

Last week, Federal Reserve chair Jerome Powell noted in testimony before the U.S. House Financial Services Committee and the U.S. Senate Committee on Banking, Housing and Urban Affairs that nearly all Federal Open Market Committee participants expect to raise interest rates again by the end of 2023.

In other distressed paper on Monday, iHeartMedia, Inc.’s 8 3/8% senior notes due 2027 (Caa1/B-) added more than 1 point by the close.

AMC Entertainment Holdings, Inc.’s. 10% senior secured second-lien notes due 2026 (Caa3/CCC-) went out flat after shedding 1½ points on Friday.

Lumen, Level 3 active

Lumen Technologies’ 4% senior secured notes due 2027 (B3/BB-) improved less than 1/8 point on Monday to a print of 73.87 on more than $10 million of secondary action, a source reported.

The issue was trading more than 5 points better from where it was marked mid-May.

Subsidiary Level 3 Financing’s 3¾% senior notes due 2029 (B1/B) were quoted at 58½ bid on $7 million of trading Monday.

The notes have gained about 2 points since the start of June.

Level 3 Financing’s 3 7/8% senior notes due 2029 (B1/B) also were seen trading at 58½ bid on $2.5 million of secondary supply.

Lumen shares closed Monday up 9.34%, at $1.99.

Level 3, a subsidiary of Denver-based telecommunications company Lumen, conducted a distressed debt exchange in April.

iHeartMedia higher

iHeartCommunications, Inc.’s 8 3/8% senior notes due 2027 (Caa1/B-) perked up by more than 1 point Monday to a print of 64.96, a source said.

Trading was on the light side at $1.3 million.

The bonds went out Friday modestly softer at the 63¾ bid range on $6 million of volume.

Last week, iHeartCommunications’ credit default swaps spreads widened 281 basis points to 1,474 bps, Moody’s Investors Service said.

The San Antonio-based media broadcasting company’s stock (Nasdaq: IHRT) closed 6.23% better on Monday, at $3.58.

AMC steadies

AMC Entertainment’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) traded flat at 71 bid on $5.5 million of secondary action Monday, a source said.

The bonds declined 1½ points going into the weekend on Friday on $2.5 million of secondary action.

AMC’s bonds had heavy secondary trading totaling more than $30 million on Thursday after the company posted a court notice that a settlement hearing was set for June 29-30 in the Delaware Court of Chancery to resolve a shareholder lawsuit brought by Allegheny County Employees’ Retirement System over its issuance of preferred stock.

The Leawood, Kan.-based movie theater owner’s common stock (NYSE: AMC) rose 0.37% over the day to $4.03.

AMC’s preferred stock (NYSE: APE) closed down 0.55% at $1.80.

Distressed index lower

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns ended Friday weaker at minus 0.65%, compared to minus 0.22% on Thursday, minus 0.47% on Wednesday and a positive 0.04% on Tuesday in the first session of the short holiday week.

Month-to-date total returns softened Friday to 3.68% versus 4.36% on Thursday, 4.6% on Wednesday and 5.09% on Tuesday.

Year-to-date distressed total returns dropped to 10.57% on Friday from 11.3% on Thursday, 11.54% on Wednesday and 12.07% at the week’s start.

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