AMC bonds move higher; Rite Aid up; Mallinckrodt little traded as company eyes options

By Cristal Cody

Tupelo, Miss., July 25 – AMC Entertainment Holdings, Inc. continued to gain traction in the junk and distressed secondary bond markets on Tuesday.

The bonds improved ½ point to ¾ point after trading more than 5 points better on Monday following a disappointing court ruling against the company.

On Tuesday, AMC reported plans to release its second-quarter results after the market closes on Aug. 8.

Rite Aid Corp.’s bonds also were higher again on Tuesday, sources reported.

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) rose ½ point over the day after adding about 2 points on Monday.

Stock indices stayed positive ahead of the Federal Reserve’s rate decision due Wednesday with the junk space a touch weaker.

The Nasdaq closed up 0.61%.

The iShares iBoxx High Yield Corporate Bond ETF declined 5 cents, or 0.07%, to $75.19.

The CBOE Volatility index fell by 0.36% to 13.86.

Elsewhere, Mallinckrodt plc’s paper has been little traded in the secondary market since the company skipped paying the interest payments on two of its bonds in June and started exploring options for a second bankruptcy.

Mallinckrodt’s 10% second-lien notes due 2025 (Caa1/CCC+) were last seen in the prior week trading in the low teens.

On Tuesday, law firm Pomerantz LLP announced that a class action lawsuit was filed against Mallinckrodt and certain officers in the U.S. District Court for the District of New Jersey for investors who acquired the company’s securities between June 17, 2022 and June 14, 2023.

The specialty pharmaceutical company is “at risk of Chapter 22” bankruptcy, according to a Fitch Ratings report on Monday.

Mallinckrodt “is engaged in negotiations with creditors on a deal that would put the company back into bankruptcy and equitize first- and second-lien debt holders, according to reports,” Fitch said.

AMC continues climb

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) added ½ point over the session to head out at 75¾ bid on Tuesday, a source said.

The note was the most active distressed issue seen traded on Tuesday on $19 million of volume.

On Monday, the issue rallied 5½ points to 68½ bid on $6 million of paper traded.

Also Tuesday, AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) traded up ¾ point to 70½ bid on $5 million of volume.

The bonds went out Monday 6¾ points higher at 68¾ bid on $15 million of secondary trading.

AMC received notice on Friday that a settlement in a shareholder lawsuit brought by Allegheny County Employees’ Retirement System over its issuance of preferred stock would not be approved as presented by the Delaware Court of Chancery. The ruling followed a June 29-30 hearing.

The company filed an addendum to the stipulation on Saturday to address the issues raised by the court and requested approval with the revised release, according to an 8-K regulatory filing on Monday.

On Sunday, AMC chief executive officer Adam Aron issued an open letter to investors on his Twitter account, noting it was important the company be able to raise fresh equity since it faces a risk of running out of cash in 2024 or 2025.

The Leawood, Kan.-based movie theater owner’s common stock (NYSE: AMC) gave back some of Monday’s gains when it rallied 33% on the day.

Shares closed Tuesday down 12.48% to $5.12.

AMC’s preferred stock (NYSE: APE) also declined 1.67% on Tuesday to $1.77 after going out Monday unchanged.

Rite Aid notes up

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) traded another ½ point higher on Tuesday at 50½ bid on $5 million of secondary activity, a source said.

The bonds were quoted Monday up around 2 points at 49 bid on $3.3 million of trading.

Rite Aid’s notes picked up about 4½ points in the prior week.

The company’s 7.7% senior bonds due 2027 (Ca/CCC-/CC) were quoted active on Tuesday at a print of 22.92 on $4.97 million of trading.

Rite Aid reported heavy fiscal 2024 first-quarter losses in June.

The Camp Hill, Pa.-based drugstore chain’s stock (NYSE: RAD) closed up 1.28% at $1.58.

Mallinckrodt soft

Mallinckrodt’s 10% second-lien notes due 2025 (Caa1/CCC+) were last seen in the prior week with a 14 bid handle, mostly unchanged from mid-June after it dropped in the first half of the month, a source said Tuesday.

The issue traded with a 78 handle on June 5.

Mallinckrodt reported June 15 that the board elected not to pay the interest payments due on its 10% notes and 11½% first-lien senior secured note due 2028 but did make a $16.5 million partial payment as part of its opioid-related settlement reached with federal authorities when it exited Chapter 11 bankruptcy on June 16, 2022.

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

Mallinckrodt has “since skipped recent opioid settlement obligations and has extended its opioid payment deadline and entered forbearance agreement with creditors through Aug. 15,” Fitch noted on Monday.

The deadline for the company's $200 million payment to the trust for its opioid settlement was first extended to June 23, then to June 30 and now to Aug. 15.

The class action complaint announced on Tuesday by Pomerantz alleges that over the June 17, 2022-June 14, 2023 class period, Mallinckrodt made materially false and misleading statements, including overstating its financial strength after emerging from Chapter 11 and its ability to make the opioid payments.

The Dublin-based pharmaceutical company’s stock (NYSE: MNK) went out on Tuesday at 44 cents, down 3.59% on the day.

Distressed returns lower

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns softened to 0.18% on Monday from 0.28% on Friday but were up from minus 0.51% in the same session a week earlier.

Month-to-date total returns rose Monday to 2.16%, compared to 1.98% on Friday and 1.6% in the week-ago session.

Year-to-date distressed total returns hit 14.04%, up from 13.84% on Friday and from 13.42% the same day last week.

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