Lumen Technologies bonds, CDS weaken; Rite Aid secured notes rebound; CommScope higher

By Cristal Cody

Tupelo, Miss., July 27 – Lumen Technologies, Inc.’s paper mostly softened by about ¼ point to 1½ points over Thursday’s session.

Lumen Technologies’ 4% senior secured notes due 2027 (B3/BB-), 7.6% notes due 2039 (Caa1/CCC+/B-) and the 5 5/8% notes due 2025 (Caa1/CCC+/B-) were the most active by early afternoon, according to a trader.

Lumen’s credit default swap spreads also softened again this week. Spreads eased more than 100 basis points after moving out nearly 700 bps last week.

Former Lumen subsidiary Embarq Corp.’s CDS spreads widened 96 bps over the past week ended Wednesday to 2,896 bps following an increase of 592 bps in the prior week, according to a Moody’s Investors Service report on Thursday.

Stock indices fell in the session after the Federal Reserve raised interest rates to the highest in more than two decades.

The S&P 500 index closed down 0.64%.

The iShares iBoxx High Yield Corporate Bond ETF dropped 60 cents, or 0.79%, to $74.89.

The Fear Factor index also climbed. The CBOE Volatility index increased 11.45% to 14.7 by the market close and went out up 9.25% at 14.41.

On Wednesday, the Federal Reserve raised interest rates by 25 basis points to put the target range for the Federal Funds rate at 5¼% to 5½%.

Primary action picked back up on Thursday in both the high-grade and junk markets following the rate hike.

Secondary trading was active early afternoon.

“People are trying to buy,” a source said.

Rite Aid Corp.’s 8% senior secured notes due 2026 (Caa3/CCC-/B) held onto the week’s gains and moved steadily higher on Thursday.

The issue was up about 3 1/8 points on the week after climbing more than 4 points in the prior week.

Rite Aid’s CDS spreads tightened nearly 1,300 bps this week and moved back under 10,000 bps.

CommScope Holding Co., Inc.’s bonds edged higher on Thursday.

The 8¼% senior notes due 2027 (Caa1/CCC+) improved ¼ point over the session.

Lumen lower

Lumen Technologies’ 4% senior secured notes due 2027 (B3/BB-/BB) shed nearly ¾ point to around 67½ bid on Thursday on $6.75 million of secondary supply by lunchtime, a source reported.

By the day’s end, the notes were down 2¼ points and trading just under 66 bid on $7.85 million of volume.

The 7.6% senior notes due 2039 (Caa1/CCC+/B-) were more than ½ point lower at the 37½ bid area on $4 million of secondary activity.

Lumen’s 5 5/8% senior notes due 2025 (Caa1/CCC+/B-) also traded down more than ¾ point to 77 bid on $3 million of volume.

Some issues traded higher, but volume was extremely thin, according to the market source.

The 4½% senior notes due 2029 (Caa1/CCC+/B-) rose nearly 3 points to a 44 bid handle.

Lumen’s paper was yielding about 14% to 28.82% on Thursday.

The company’s CDS spreads softened 110 bps this week ended Wednesday to 2,896 bps, according to a Moody’s report on Thursday.

The issuer’s CDS spreads widened 679 bps in the prior week.

Lumen will post its second-quarter earnings results on Aug. 1.

Shares (NYSE: LUMN) in the Denver-based telecommunications company and parent of Level 3 Financing, Inc. closed down 5.52% at $1.71.

Rite Aid continues climb

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) bumped up ¼ point to 51 1/8 bid on $2 million of trading on Thursday, a source said.

The notes yielded 33.7%.

Rite Aid’s bonds have made steady gains over the week, trading up 2 points on Monday, ½ point on Tuesday and 3/8 point on Wednesday.

The issue climbed about 4½ points in the prior week.

Rite Aid’s CDS spreads also tightened 1,298 bps over the past week ended Wednesday to 9,673 bps, according to a Moody’s report.

The company’s spreads had widened 451 bps in the previous week and more than 2,700 bps a week earlier.

The Camp Hill, Pa.-based drugstore chain’s stock (NYSE: RAD) closed Thursday 1.86% lower at $1.58.

CommScope up

CommScope’s 8¼% senior notes due 2027 (Caa1/CCC+) went out ¼ point higher on Thursday at 75½ bid, a market source said.

Trading was on the light side with $3.8 million of reported volume.

The notes have dropped about 1¾ points from a week ago.

CommScope’s 5% senior notes due 2027 (Caa1/CCC+) were quoted going out at 66¾ bid on $4.5 million of trading on Thursday.

The issuer’s 7 1/8% senior notes due 2028 (Caa1/CCC+) also rose ¼ point over the day to around 66¾ bid on $4 million of paper changing hands.

CommScope’s bonds were under pressure in the prior week after an equity downgrade from Deutsche Bank.

The Hickory, N.C.-based network infrastructure manufacturer’s stock (Nasdaq: COMM) declined 3.9% on Thursday to $4.44.

Distressed returns dip

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns declined midweek to 0.04% from 0.18% on Tuesday and Monday.

Month-to-date total returns rose Wednesday to 2.39% from 2.34% on Tuesday and 2.16% at the start of the week.

Year-to-date distressed total returns were higher midweek at 14.29% versus 14.24% on Tuesday and 14.04% on Monday.

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