Level 3 distressed bonds mixed; CommScope up; Wheel Pros active; new issues in focus

By Cristal Cody

Tupelo, Miss., Sept. 29 – Level 3 Financing, Inc.’s notes sent off mixed signals on Friday with two tranches of B3/CCC+-rated paper nearly ½ point better or lower in heated trading over the afternoon before the issuer’s bonds went out mostly softer on the week.

Secondary trading volume moved past $24 million over the session.

“Bondholders are sort of getting together to strike some kind of deal,” a source said.

The 3 5/8% senior notes due 2029 (B3/CCC+) were quoted by the close 1 point lower in the most active issue.

Trading supply totaled nearly $17 million by the end of the session.

CommScope Holding Co., Inc.’s paper saw strong gains with the bonds up about 1½ points to nearly 2 points in afternoon trading.

New junk paper, including from Shelf Drilling Holdings, Ltd., attracted the bulk of the day’s secondary focus, sources reported.

“There’s not a heck of a lot to talk about,” a source noted of Friday’s distressed market action. “It’s very quiet. Next Friday will be even quieter because of the three-day holiday weekend.”

The upcoming week’s market activity likely will be front-loaded ahead of the long Columbus Day weekend, sources report.

Stocks finished mixed.

The S&P 500 index fell 0.27%, with the iShares iBoxx High Yield Corporate Bond ETF shedding 11 cents, or 0.15%, to close at $73.72.

The CBOE Volatility index went out 1.04% higher at 17.52.

The distressed market is growing after ending September with more defaults.

Year to date, defaults include $28 billion of bonds and $35 billion of loans, according to a BofA Securities note on Friday.

The default pace year to date already has outpaced the full 2022 total of $21.21 billion.

Wheel Pros Inc. was among the companies counted among September’s defaults following its distressed debt restructuring a week ago.

The issuer’s 6½% senior notes due 2029 (C/CCC-) were moving in the secondary market on Friday on a low 30s handle, a source said.

Level 3 soft

Level 3’s 3 5/8% senior notes due 2029 (B3/CCC+) were 0.44 point higher at a print of 56.438 on $14.35 million of secondary action early afternoon, a source reported.

Over the same time, the company’s 3¾% notes due 2029 declined 0.32 point to 55.682 on $10 million of trading on Friday.

Level 3’s 4¼% senior notes due 2028 (B3/CCC+/B) also were mostly flat at 62½ bid on $4.6 million of volume.

The company’s bonds remained mostly soft by the day’s close.

The 3 5/8% notes were quoted going out at 55¾ bid, 56¾ offered, down from 56¾ bid, 57¾ offered on Thursday.

“They were the most active,” one source said.

Trading supply in the issue totaled nearly $17 million over the day.

The notes were about 1 point lower on the week.

Parent Lumen Technologies, Inc. and its subsidiaries were downgraded in August by Moody’s Investors Service and Fitch Ratings based on a heavy debt load coming due in 2025 and 2027 and the company’s disclosure of a bondholder group formed to discuss refinancing options and covenant compliance for the proceeds from the sale of its Latin American business.

A class-action lawsuit against the Denver-based telecommunications company also was filed in September over risks regarding Lumen’s lead-covered cable infrastructure.

CommScope bonds improve

CommScope, Inc.’s 7 1/8% senior notes due 2028 (Caa1/CCC+) traded around 2 points higher at just under 59 bid on Friday on $3.6 million of volume, a source said.

The 5% senior notes due 2027 (Caa1/CCC+) picked up 1½ points to 55¾ bid on $2.3 million of activity during the session.

CommScope’s 8¼% senior notes due 2027 (Caa1/CCC+) also were nearly 1½ points better near the 65¾ bid range on $5.75 million of trading.

The Hickory, N.C.-based network infrastructure manufacturer’s distressed paper was yielding around 21% to more than 23% on Friday.

Wheel Pros active

Wheel Pros’ 6½% senior notes due 2029 (C/CCC-) traded Friday at 33¾ bid on $4 million of secondary volume in one of the day’s more active issues, a source said.

S&P Global Ratings upgraded the company to CCC+ from selective default on Wednesday.

The Denver-based tire manufacturer announced Sept. 22 that it closed on its debt restructuring that included exchanging existing unsecured notes into new subordinated notes and a loan transaction that provided the company with $235 million of new money term loans and exchanged at a discount nearly all of its $1.15 billion existing term loans for new term loans.

Distressed returns soft

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns improved to minus 0.13% on Thursday.

One-day returns came to minus 0.35% on Wednesday, minus 0.5% on Tuesday and minus 0.09% on Monday.

Month-to-date total returns were at 0.04% on Thursday, compared to 0.17% on Wednesday, 0.52% on Tuesday and 1.02% in the week’s first session.

Year-to-date distressed total returns slipped to 17.17% from 17.32% midweek, 17.73% on Tuesday and 18.32% on Monday.

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