Carvana paper, stock rallies; Lumen, Level 3 bonds mostly higher; Rite Aid drifts lower

By Cristal Cody

Tupelo, Miss., June 28 – A summer slowdown is starting to take shape with primary and secondary action slowing across credits, sources reported.

Distressed trading volume stayed on the light side on Wednesday with a few names active on less than $10 million of trading.

Carvana Co.’s 10¼% senior notes due 2030 (Ca/CCC-) picked up 2 points in steady trading.

The company’s stock rallied more than 15% over the session.

Bonds from Lumen Technologies, Inc. and subsidiary Level 3 Financing, Inc. mostly moved higher over the session.

Lumen’s 5 1/8% senior notes due 2026 (Caa1/CCC+) traded 2 points better on Wednesday, while Level 3 Financing’s 4 5/8% senior notes due 2028 (B1/B) went out flat.

Market tone was mixed over the session, though volatility pulled back.

The S&P 500 index closed off 0.04%.

The iShares iBoxx High Yield Corporate Bond ETF added 43 cents, or 0.58%, to $74.91.

Market volatility decreased a second consecutive session on Wednesday.

The CBOE Volatility index declined 2.26% to 13.43.

Default expectations may be on the rise for some issuers rated B- instead of CCC+, according to a S&P Global Ratings report released Wednesday.

“The peak differential in credit spreads in absolute terms occurs at the transition from B to B-, one step above an obvious pressure point: the downgrade into the CCC rating category,” S&P said. “The fact that the peak differential in absolute terms occurs at B to B- may imply that B-, rather than CCC+, is the rating level at which markets materially increase default expectations.”

Meanwhile, Rite Aid Corp.’s 8% senior secured notes due 2026 (Caa3/CCC-/CCC) have drifted lower over the past two sessions ahead of its earnings release on Thursday.

The notes were down more than 1 point on Wednesday after dropping about 1 point in Tuesday’s session.

Carvana improves

Carvana’s 10¼% senior notes due 2030 (Ca/CCC-) posted a 2-point gain by the close on Wednesday, a source said.

The bonds were quoted around 79½ bid on $5.6 million of volume.

Carvana’s issue has rebounded from trading with a handle in the low 50s in March.

The company reported earlier in June that it expects higher adjusted EBITDA of above $50 million in the second quarter.

Carvana also announced on June 2 that it terminated an exchange offer for five series of notes after not attracting the minimum participation condition of $500 million of tendered notes.

The Tempe, Ariz.-based online car retailer’s stock (NYSE: CVNA) rallied 15.35% to $28.03 on Wednesday.

Lumen, Level 3 mixed

Lumen Technologies’ 5 1/8% senior notes due 2026 (Caa1/CCC+) traded 2 points higher on Wednesday at 70½ bid on $1.5 million of secondary activity, a market source said.

Lumen subsidiary Level 3 Financing’s 4 5/8% senior notes due 2028 (B1/B) were among the issuer’s most actively traded bonds, but went out flat at 69¼ bid on about $6 million of volume.

Level 3’s 4¼% senior notes due 2028 (B1/B) traded about ¾ point higher at 64¼ bid on $2.4 million of volume over the day.

Shares (NYSE: LUMN) from Denver-based telecommunications company Lumen improved 4.31% to $2.18.

Rite Aid declines

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) have shed about 2 points over the past two sessions, a source said.

The notes went out Wednesday down more than 1 point on a 48 bid handle in light trading totaling $1 million.

Rite Aid’s 7½% senior secured notes due 2025 (Caa3/CCC-/B) also were active on Wednesday, trading at 65 1/8 bid on $3 million of volume.

Rite Aid is scheduled to post its fiscal 2024 first-quarter results on Thursday.

The Camp Hill, Pa.-based drugstore chain’s stock (NYSE: RAD) closed down 4.4% at $1.52.

Distressed index gains

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns moved up on Tuesday to 0.24% after ending Monday at minus 0.17%.

Month-to-date total returns improved to 3.76% versus 3.51% at the week’s start.

Year-to-date distressed total returns rose to 10.66% on Tuesday from 10.39% on Monday.

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