Staples, Michaels bonds trade up on day, lower on week; Lumen one of week’s top gainers

By Cristal Cody

Tupelo, Miss., Sept. 22 – Distressed corporate paper was among some of the week’s biggest gainers and losers, though secondary trading slowed on Friday.

Secondary interest was high over the day in new junk issues, especially Worldpay’s 7½% senior secured notes due 2031 that saw $33 million of paper changing hands, but distressed names also were active, sources reported.

Staples Inc.’s bonds improved but were ending the week nearly 2 points lower following a ratings downgrade.

Staples’ 10¾% senior notes due 2027 (Caa2/CCC) added over ¼ point on Friday.

In other distressed retailers, Michaels Cos., Inc.’s 7 7/8% senior notes due 2029 (Caa2/CCC) also recovered ½ point on Friday but were going out around 2 points lower on the week.

Equities stayed under pressure on Friday, though volatility pulled back after climbing following the Federal Reserve’s decision Wednesday to keep interest rates unchanged.

The S&P 500 index closed down 0.23%.

The iShares iBoxx High Yield Corporate Bond ETF improved 13 cents, or 0.18%, to $74.

The CBOE Volatility index retreated 1.94% to 17.20.

Meanwhile, Lumen Technologies, Inc.’s paper softened on Friday but was one of the week’s biggest gainers as the company faces numerous issues, including a class-action lawsuit filed Monday, market sources reported.

The issuer’s 4% senior secured notes due 2027 (Caa2/B) fell ¼ point in light trading of under $2 million.

Staples improves

Staples’ 10¾% senior notes due 2027 (Caa2/CCC) took back over ¼ point on Friday to trade with a 58 bid handle, a source reported.

Volume was steady with $4.5 million of secondary activity, up from Thursday when the issue fell ½ point to 57½ bid on $1.8 million of volume.

The bonds remained lower on the week on the heels of a downgrade on Wednesday from S&P Global Ratings.

Staples’ bonds gave back 1.8 points this week, according to a BofA Securities note on Friday.

The issue is down over 7 points year to date.

The Framingham, Mass.-based office products retail company is owned by private equity firm Sycamore Partners.

Michaels trades up

Michaels’ 7 7/8% senior notes due 2029 (Caa2/CCC) added ½ point on Friday to a quote of 67 bid in light secondary trading, a market source said.

Volume totaled $1 million.

The notes were volatile on Tuesday and dropped as much as 3¼ points during the session.

Michaels’ bonds were one of the week’s biggest losers and declined 2.1 points this week, according to a BofA report.

The Irving, Tex.-based arts and crafts retailer was taken private in 2021 by funds managed by Apollo Global Management, Inc. affiliates.

Lumen better on week

Lumen’s 4% senior secured notes due 2027 (Caa2/B) fell ¼ point to 67¼ bid in secondary trading on Friday on $1.7 million of activity, a source said.

Lumen’s paper was one of the market’s biggest gainers and was up 4.1 points this week, though down 34.5 points year to date, according to the BofA research note.

On Monday, the company was reportedly the subject of complaints in a lawsuit over the risks to its lead-covered cable infrastructure.

The Denver-based telecommunications company reported a week earlier that a bondholder group formed to discuss refinancing options and its covenant compliance for the proceeds from the sale of its Latin American business has no evidence to support its claims.

Distressed returns drop

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns declined on Thursday to minus 0.8% in the weakest session so far in the week.

Returns were at 0.15% on Wednesday, minus 0.17% on Tuesday and at 0.05% on Monday.

Month-to-date total returns moved back below 1% on Thursday. Returns were 0.97% for the month through Thursday, down from 1.78% on Wednesday, 1.62% on Tuesday and 1.8% on Monday.

Year-to-date distressed total returns slipped to 18.25% from 19.2% on Wednesday, 19.02% on Tuesday and 19.23% at the week’s start.

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