AMC bonds decline in heated distressed interest; Rite Aid rises; Mallinckrodt drops

By Cristal Cody

Tupelo, Miss., Aug. 28 – AMC Entertainment Holdings, Inc.’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) topped the charts in the distressed secondary market on Monday with more than $17 million of paper changing hands.

The issue gave back 1½ points after going into the weekend over 2 points lower on Friday and more than 8 points lower on the week following AMC’s preferred stock conversion.

The yield on the 10% notes shot up to nearly 32% on Monday from 21.77% in the same session last week.

Rite Aid Corp.’s paper remained stronger in light distressed trading after news broke on Friday that the company plans to file for Chapter 11 bankruptcy soon.

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) picked up ¼ point on Monday after adding 4 1/8 points on Friday.

Otherwise, secondary action was light in the distressed paper with AMC’s notes grabbing the bulk of the day’s volume, according to a market source.

Market tone was strong in equities with indices all higher.

The S&P 500 index rose 0.63%.

The iShares iBoxx High Yield Corporate Bond ETF improved 28 cents, or 0.38%, to $74.89.

The CBOE Volatility index withdrew 3.83% to 15.08.

In other distressed paper, Mallinckrodt plc’s bonds softened further on Monday after the company reported it officially filed for its second Chapter 11 bankruptcy after emerging from bankruptcy in 2022.

Mallinckrodt’s 10% senior secured first-lien notes due 2025 (Caa3/CCC+) shed 1¼ points in thin volume.

AMC bonds drop

Secondary action heated up on Monday in AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) on over $17 million of volume headed into the market close, a source said.

The notes were quoted down 1½ points at 61½ bid.

The yield on the 10% notes jumped to 31.75% on Monday from 21.77% in the same session last week.

In the same session a week ago, the issue was quoted at 76 1/8 bid.

The bonds went out Friday down more than 8 points on the week.

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) also fell 1 point to around 67 bid and a 17.04% yield on $7 million of trading on Monday.

The issue was off ½ point on Friday.

On Thursday, AMC conducted a share increase and reverse stock split to allow the conversion of all of its outstanding preferred equity units into shares of class A common stock.

AMC announced the conversion after the Delaware Court of Chancery approved the settlement of a shareholder lawsuit brought by Allegheny County Employees’ Retirement System over the issuance of its preferred stock.

The Leawood, Kan.-based movie theater owner’s post-conversion shares (NYSE: AMC) opened Thursday at $19.60 and closed the session down 26.68% to $14.37.

The stock fell another 13.5% to end Friday at $12.43.

Shares declined 10.94% on Monday to $11.07.

Rite Aid notes up

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) picked up ¼ point on Monday to a quote of 61¼ bid and a 26.72% yield in light trading totaling $2 million, a source reported.

The bonds rallied 4 1/8 points on Friday to 61 1/8 bid following a Wall Street Journal report that Rite Aid is preparing to file for Chapter 11 in the coming weeks.

Rite Aid’s 7½% senior secured notes due 2025 (Caa3/CCC-) traded over 1¾ points better going into the close on Monday at 60 bid and a yield of 40.31% in thin trading.

Rite Aid’s stock (NYSE: RAD) plunged 51.39% on Friday but recovered 8.23% by Monday’s close to head out at 76 cents in heavy trading.

Shares touched the new 52-week low of 66 cents set on Friday again during Monday’s session.

The Camp Hill, Pa.-based drugstore chain is facing a slew of issues, including heavy first-quarter losses reported in June and an opioid-related complaint announced March 13 from the Department of Justice that the drugstore chain knowingly filled unlawful prescriptions for controlled substances.

Mallinckrodt softens

Mallinckrodt’s 10% senior secured first-lien notes due 2025 (Caa3/CCC+) traded Monday down 1¼ points to 78½ bid in light secondary supply following the Chapter 11 filing, a source said.

The bonds have a call date of Sept. 24 coming up.

Mallinckrodt’s 10% second-lien notes due 2025 (/CC) went out at 10¼ bid, down ¾ point from Friday.

The issue plunged about 70 points in June.

The bonds’ next call date is Sept. 4.

Mallinckrodt said Monday that it filed for pre-packaged Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware.

The company had announced on Wednesday that it entered into a restructuring support agreement with the majority of holders of its first- and second-lien debt and the opioid settlement trust for a plan that will cut its total funded debt by $1.9 billion and extend its maturity runway.

The Dublin-based pharmaceutical company said it expects to complete the bankruptcy process in the fourth quarter.

Distressed returns soft

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns finished the prior week lower at minus 0.3%, down from minus 0.24% on Thursday and minus 0.09% at the week’s start.

Month-to-date total returns fell to 0.8% on Friday from 1.1% on Thursday and 1.14% at the start of the previous week.

Year-to-date distressed total returns declined to 15.86% on Friday versus 16.2% on Thursday and 16.24% at the start of the week.

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