Staples notes improve pre-earnings; AMC rebound continues; Lumen gives back gains

By Abigail W. Adams

Portland, Me., Sept. 12 – It was a soft day for the distressed debt space on Tuesday with all eyes on Wednesday’s release of the Consumer Price Index report.

Distressed debt credits have led gains in 2023 with a surprisingly resilient economy staving off the recession concerns that battered the market in 2022.

However, the market is not out of the woods, a source said.

Recession and refinancing risks remain a concern, especially with future rate hikes or a higher-for-longer rate environment, the source said.

While the market is widely anticipating the Fed to announce another pause in rate hikes on Sept. 20, large swaths of the market still anticipate an additional rate hike before the year draws to a close.

As market players await a key piece of inflationary data, performances in the distressed debt space remained credit specific.

Staples Inc.’s senior notes were in focus on Tuesday with its secured and unsecured tranches making large gains ahead of the company’s earnings report.

AMC Entertainment Holdings, Inc.’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) continued to rebound in heavy volume with the notes slashing losses since heavy selling in late August.

Lumen Technologies, Inc.’s 4% senior secured notes due 2027 (Caa2/B) continued to give back gains after surging last Friday following an investor presentation.

Staples gains

Staples’ senior notes were in focus on Tuesday with its secured and unsecured tranches making hefty gains ahead of the retailer’s earnings report.

The 10¾% senior notes due 2027 (Caa2/CCC+) jumped 3 points in heavy volume.

The notes closed the day in the 60½ to 61½ context with the yield about 29%, a source said.

There was $6 million in reported volume.

The 7½% senior secured notes due 2026 (B3/B) gained a more modest 1 point to close the day at 84½.

The yield was about 15%.

There was $8 million in reported volume.

Staples is scheduled to report earnings on Sept. 15, a source said.

AMC rebounds

AMC’s 10% senior secured second-lien notes due 2026 continued to rebound in heavy volume on Tuesday with the notes more than halving losses since selling pressure dragged the notes down 16 points in late August.

The 10% notes were up another 1 point after a 1 point gain the previous session.

They closed the day wrapped around 70 with the yield 25 7/8%, a source said.

There was $18 million in reported volume.

The notes have now eliminated losses from a bout of selling late last week sparked by AMC’s announcement of a follow-on offering of up to 40 million shares.

The notes have more than cut in half its losses from late August when the company’s reverse stock split and conversion of its APE equity units sparked heavy selling in the name.

The notes sank as low as 61 in the selling frenzy.

They were trading on a 76-handle prior to the conversion news.

Lumen gives back gains

Lumen’s 4% senior secured notes due 2027 continued to give back gains after surging last Friday following a presentation at an investor’s conference.

The 4% notes were off ¾ point in heavy volume.

They closed the day in the 64 to 64½ context with the yield about 18¾%.

The notes were trading on a 62-handle heading into last Friday’s session but bounced as high as 66 after the company’s CFO presented at Goldman Sachs’ Communacopia + Technology Conference.

The company’s CFO is scheduled to give another presentation at BofA Securities Media, Communications and Entertainment conference on Thursday.

While Lumen has been among the best performing credits in 2023, the company’s capital structure saw heavy selling following a series of credit downgrades in late August.

Investors are already organizing out of concern about the company’s ability to address its 2025 maturities.

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