Rite Aid notes mixed, CDS spreads gap out; AMC improves; iHeart sees secondary interest

By Cristal Cody

Tupelo, Miss., Aug. 31 – Rite Aid Corp.’s paper mostly improved on Thursday and remained stronger on the week, while the retailer’s credit default swap spreads moved out more than 8,000 basis points this week.

Rite Aid’s bonds have mostly rallied since the end of the prior week on bankruptcy chatter.

The 8% senior secured notes due 2026 (Caa3/C/B) slipped ¼ point on Thursday in one of the more active distressed names trading on $4 million of volume.

Rite Aid’s 7½% senior secured notes due 2025 (Caa3/CCC-) were up ¼ point in lighter supply.

Market activity overall in the distressed space remains light with the end of summer approaching, sources report.

AMC Entertainment Holdings, Inc.’s bonds on Thursday continued to recover from last week’s losses following the company’s reverse stock split.

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) by late afternoon were up 1¼ points on $20 million of volume, putting it among the most active junk names, a source said.

In the overall markets on Thursday, equities were under pressure.

The S&P 500 index declined more than 7 points, or 0.16%, while the iShares iBoxx High Yield Corporate Bond ETF fell 5 cents, or 0.07%, to $75.28.

The CBOE Volatility index was down 2.23% to 13.57 by the end of the session.

iHeartCommunications, Inc.’s paper also saw steady volume that put it among the busier distressed names trading on Thursday, a source said.

iHeartCommunications’ 8 3/8% senior notes due 2027 (Caa1/CCC+) traded 5/8 point better on Thursday on nearly $8 million of volume.

Rite Aid mixed

Rite Aid’s bonds were mixed on Thursday in an otherwise quiet session, while the retailer’s CDS spreads gapped out over 8,000 bps.

The 8% senior secured notes due 2026 (Caa3/C/B) fell ¼ point to 63½ bid on $4 million of notes traded, a source said.

In the previous session, the bonds added about 2 points on $5 million of volume.

The notes have climbed more than 7 points this week following news reports that the retailer plans to file for bankruptcy.

Rite Aid’s 7.7% senior bonds due 2027 (Ca/C/CC) improved to 13 3/8 bid on $2.5 million of secondary supply Thursday, up from where it was quoted Wednesday at 10 bid, 12 offered.

The secured bonds also were higher on the day.

Rite Aid’s 7½% senior secured notes due 2025 (Caa3/CCC-) traded up ¼ point at 63½ bid on $2.3 million of activity.

The secured notes have picked up more than 5 points week to date.

Meanwhile, Rite Aid’s CDS spreads gapped out 8,032 bps this week ended Wednesday to 30,148 bps, according to a Moody’s Investors Service report on Thursday.

The retail chain’s CDS spreads widened 5,776 bps in the prior week and 4,538 bps a week earlier.

S&P Global Ratings downgraded Rite Aid on Tuesday on the view that a default, distressed exchange or redemption is likely within six months.

Rite Aid’s notes have mostly traded higher since Friday after a Wall Street Journal report broke that the retailer intends to soon file for Chapter 11 bankruptcy.

Rite Aid’s stock (NYSE: RAD) had recovered about 15% by midweek after going out in the prior week down more than 50% but turned negative on Thursday.

Shares fell 6.09% to 77 cents.

The Camp Hill, Pa.-based drugstore chain reported heavy first-quarter losses in June and faces an opioid-related complaint announced March 13 from the Department of Justice.

AMC notes higher

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) by late afternoon were up 1¼ points at 69½ bid on $20 million of volume on Thursday, a source said.

The yield was 26%.

Trading in the issue has been heavy over the last couple of sessions. On Wednesday, the notes were quoted 6 points better on $17 million of volume.

The notes finished the prior week down more than 8 points and shed another 1½ points on Monday and about ½ point on Tuesday following AMC’s preferred equity conversion into common stock last week.

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) also improved ¼ point on $1 million of secondary supply on Thursday. The issue was quoted at 68½ bid.

The notes were seen in the previous session about 1½ points better on $11 million of supply.

AMC’s bonds slid last week and earlier this week following the company’s share increase and reverse stock split undertaken to allow the conversion of all of its outstanding preferred equity units into shares of class A common stock.

The Leawood, Kan.-based movie theater owner’s common stock (NYSE: AMC) dropped 1.41% on Thursday to $12.55.

iHeartMedia improves

iHeartCommunications’ 8 3/8% senior notes due 2027 (Caa1/CCC+) traded 5/8 point better on Thursday at a quote of 69½ bid, a source said.

The bonds saw $7.9 million of volume during the session.

iHeart’s notes have picked up about 1½ points in the back half of the month.

San Antonio-based media broadcasting company iHeartMedia, Inc.’s shares (Nasdaq: IHRT) gave back 4.24% on Thursday to end at $3.61.

Distressed index dips

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns softened midweek to 0.31% from 0.37% on Tuesday but remained up from 0.26% on Monday.

Month-to-date total returns jumped on Wednesday to 1.76% from 1.44% in the prior session and 1.07% at the week’s start.

Year-to-date distressed total returns improved to 16.96% midweek, compared to 16.6% on Tuesday and 16.17% on Monday.

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