Staples in focus, secured notes drop; Bausch Health active; Lion’s Gate paper rises

By Abigail W. Adams

Portland, Me., Sept. 13 – The broad distressed debt space was relatively flat on Wednesday with the latest piece of inflationary data failing to provide clarity on the Fed’s path forward.

While the report came largely in line with expectations, the core PCI increase of 0.3% came as a surprise to a market expecting a more modest 0.2%.

The data did little to revise market expectations for a pause in hikes in September, although debate remains about future hikes in November and December, a source said.

With the continued macro uncertainty, topical news remained the driver of activity in the space with Staples Inc.’s senior notes squarely in focus.

The notes surged on Tuesday after the company posted preliminary results.

While active on Tuesday, the notes were mixed with the unsecured tranche leveling off as the secured notes pulled back.

Bausch Health Cos., Inc.’s notes (Caa1/CCC+) were active although largely unchanged on the day as unrestricted subsidiary Bausch + Lomb Corp. markets an offering.

Lions Gate Entertainment Corp.’s 5½% senior notes due 2029 (B3/CCC+) were on the rise in active trade after a private equity firm lifted its share holdings.

Staples in focus

Staples’ senior notes remained in focus on Wednesday after surging the previous session following the release of earnings.

While the office retailer’s 10¾% senior notes due 2027 (Caa2/CCC+) leveled off after a 3 point jump on Tuesday, the 7½% senior secured notes due 2026 (B3/B) gave back their gains.

The 10¾% senior notes continued to trade in a wide range between 60 and 61¾ in heavy volume, a source said.

They stood poised to close the day on a 60-handle with the yield about 29½%.

There was $20 million in reported volume.

However, the 7½% secured notes gave back nearly 1½ points on Wednesday to return to their previous level prior to Tuesday’s surge.

The notes returned to an 82-handle and closed the day in the 82½ to 82¾ context with the yield about 16%.

There was $17 million in reported volume.

The notes surged on Tuesday after the company posted preliminary earnings results that were not as bad as anticipated.

The company posted a modest increase in adjusted EBITDA of $204 million and a slight decrease in sales, a source said.

However, Friday’s conference call will be the tell-tale for the company with the notes expected to remain active as investors pre-position, the source said.

Bausch Health active

Bausch Health’s senior notes were active although with little movement in price as its unrestricted subsidiary preps a $1.4 billion offering.

The 11% senior notes due 2028 remained in the 70¾ to 71¼ context in heavy volume with the yield about 20½%, a source said.

There was $15 million in reported volume.

The 6 1/8% notes continued to trade in the 64½ to 65 context with the yield about 21¼%.

There was $7 million in reported volume.

The notes were active as Bausch subsidiary Bausch + Lomb markets a $1.4 billion offering of five-year senior secured notes.

Bausch Health is facing securities litigation related to the hotly contested spinoff of Bausch + Lomb, which became an unrestricted subsidiary in November 2022.

Lion’s Gate rises

Lion’s Gate Entertainment’s 5½% senior notes due 2029 were on the rise in active trade on Wednesday.

The notes climbed 1½ points to close the day at 64 3/8 with the yield about 15 1/8%, according to a market source.

There was $5.5 million in reported volume.

News that former Treasury secretary Steven Mnuchin’s private equity firm Liberty 77 Capital LP had increased its holdings of class A common stock to 5.5% may have sparked interest in the name, a source said.

The firm indicated it intended to make suggestions to management, such as a spinoff of one of its businesses, a source said.

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