CommScope bonds slide on second-quarter losses; Lumen notes decline; Rite Aid higher

By Cristal Cody

Tupelo, Miss., Aug. 3 – CommScope Holding Co., Inc.’s bonds slid at the start of trading on Thursday and continued to mostly move lower through the session after the company reported heavy second-quarter losses.

CommScope’s paper was flat to more than 6 points lower on Thursday in strong secondary supply during the session, sources reported.

In early trading, CommScope, Inc.’s 8¼% senior notes due 2027 (Caa1/CCC+) dropped 4¼ points and moved another 2 points lower going out.

The company’s stock plunged 26%.

Lumen Technologies, Inc.’s notes stayed under pressure on Thursday after posting second-quarter losses earlier in the week.

Lumen’s 4% senior secured notes due 2027 (B3/BB-/BB) declined ¾ point, while its 7.6% notes due 2039 (Caa1/CCC+/B-) dropped 2 points.

Lumen’s credit default swap spreads widened a third consecutive week and eased over 550 basis points this week.

Former Lumen subsidiary Embarq Corp.’s CDS spreads also eased 485 bps to 3,381 bps over the week ended Wednesday, according to a Moody’s Investors Service report.

Embarq’s CDS spreads eased 96 bps in the prior week and 592 bps a week earlier.

Market tone remained soft on Thursday with stocks lower after Fitch Ratings’ downgrade on Tuesday of the United States to AA+ from AAA.

The S&P 500 index, down 1.38% on Wednesday, fell 0.25% on Thursday.

The iShares iBoxx High Yield Corporate Bond ETF was off 24 cents, or 0.32%, at $74.21.

The CBOE Volatility index pulled back by 1.06% to 15.92 after climbing over 15% on Wednesday.

Rite Aid Corp.’s bonds traded higher on Thursday, while its CDS spreads moved out over 1,000 bps this week to back above 10,000 bps.

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) added more than 3 points during the session.

The company’s stock also was up more than 14% on Thursday on heavy trading volume.

CommScope drops

In early trading on Thursday, CommScope, Inc.’s 8¼% senior notes due 2027 (Caa1/CCC+) slid 4¼ points to 70 bid, a source said.

The bonds were last seen over 2 points lower going out at 68 bid, down 6½ points on the day on $26.56 million of secondary action.

The notes were among the most active junk issues and most active distressed issue seen trading, according to the market source.

CommScope’s 4¾% notes due 2029 (B1/B) fell 1 7/8 points to 74½ bid on $11.5 million of activity.

The 7 1/8% senior notes due 2028 (Caa1/CCC+) were down about 4 points at 61¼ bid on $12 million of trading on Thursday.

CommScope’s 5% senior notes due 2027 (Caa1/CCC+) also were quoted 6½ points lower at 59½ bid. Trading totaled $4 million.

On Thursday, CommScope reported second-quarter losses of $100.4 million, deeper than the $61 million of losses in the same quarter last year.

Sales fell to $1.9 billion from $2.3 billion in the year-ago quarter.

The company also decreased its outlook for core adjusted EBITDA for 2023 to $1.15 billion from $1.25 billion.

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

The Hickory, N.C.-based network infrastructure manufacturer’s stock (Nasdaq: COMM) sank 26.24% by the close to $3.26. Shares traded as low as $3.04 over the session. Volume was heavy with more than 21 million shares traded, compared to average volume of 3.2 million shares.

Lumen declines

Lumen Technologies’ 7.6% senior notes due 2039 (Caa1/CCC+/B-) were trading Thursday at 33½ bid, down 2 points over the session on $4 million of volume, a source said.

The company’s 4% senior secured notes due 2027 (B3/BB-/BB) declined ¾ point to 66¾ bid on $2.6 million of trading.

Lumen’s CDS spreads widened 557 bps this past week ended Wednesday to 3,876 bps, Moody’s said.

The company’s CDS spreads softened 110 bps in the previous week and 679 bps in the week prior.

On Tuesday, Lumen reported second-quarter losses of $8.74 billion versus a $344 million profit in the same quarter last year.

The Denver-based telecommunications company’s stock (NYSE: LUMN) fell 6.14% to $1.68 on Thursday.

Rite Aid active

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) improved over 3 points to 52¾ bid on $4 million of paper changing hands on Thursday, a source said.

Rite Aid’s notes traded at 51 1/8 bid in the same session a week ago.

The company’s CDS spreads eased 1,060 bps to 10,733 bps for the past week ended Wednesday, according to a Moody’s report.

In the prior week, Rite Aid’s CDS spreads had tightened 1,298 bps to 9,673 bps.

The Camp Hill, Pa.-based drugstore chain’s stock (NYSE: RAD) shot up 14.73% on Thursday to $2.57 on heavy trading volume of more than 22 million shares. Average volume is 3 million shares.

Distressed index weakens

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns remained weak in the second session of August, declining to minus 0.55% on Wednesday, compared to minus 0.17% on Tuesday and 0.5% at the week’s start.

Month-to-date total returns softened to minus 0.72% versus minus 0.17% on Tuesday and from 2.96% of July total returns on Monday.

Year-to-date distressed total returns dropped to 14.11% on Wednesday from 14.75% on Tuesday and 14.94% on Monday.

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