CommScope declines under renewed pressure; Level 3 paper mostly lower; Rite Aid gains

By Cristal Cody

Tupelo, Miss., Oct. 11 – Bonds from CommScope Holding Co., Inc. came under renewed pressure in strong trading in the distressed market on Wednesday.

The company’s senior notes fell over 1¼ points to 2 points during the session.

Level 3 Financing, Inc.’s bonds also saw a lot of secondary interest on Wednesday but went out mostly lower.

Level 3’s longer-dated tranches softened 5/8 point to more than 1 point as its shorter-dated notes improved.

The 3 5/8% senior notes due 2029 (B3/CCC+/B) traded nearly 1 1/8 points weaker, while the 4 5/8% senior notes due 2027 (B3/CCC+/B) were more than ¼ point better going out.

Stocks finished higher on Wednesday with Treasury yields receding a second day.

The CBOE Volatility index fell 5.52% to 16.09.

The iShares iBoxx High Yield Corporate Bond ETF ended mostly flat at $73.20 following the release of the minutes from the Federal Reserve’s monetary policy meeting in September.

Third-quarter earnings season kicks off in earnest on Friday with reports from the major U.S. banks including JPMorgan Chase & Co. and Wells Fargo expected.

“The bottom line is, despite a better-than-expected jobs report last week, banks are likely to reveal that headwinds still remain,” Christine Short of Wall Street Horizon said in a report this week.

“Currently S&P 500 earnings growth for the third quarter is set to come in at -0.3%, which would be the fourth consecutive drop in YoY earnings-per-share growth,” Short said. “High interest rates, a waning consumer and now with the addition of the Israel-Hamas war, it’s clear U.S. companies still have a lot to contend with.”

Walgreens Boots Alliance, Inc. will report on Thursday, giving some insight into the pharmacy retail space.

Drugstore chain Rite Aid Corp. is widely expected to file for Chapter 11 bankruptcy as its bonds and stock have sunk to distressed levels.

Rite Aid’s paper ticked higher a second day in steady trading on Wednesday.

The 8% senior secured notes due 2026 (Caa3/CCC-/B) were about 1½ points better after adding 2 points on Tuesday.

CommScope down

CommScope, Inc.’s 8¼% senior notes due 2027 (Caa1/CCC+) dropped over 1¼ points to 65 bid on $3.4 million of activity on Wednesday, a source reported.

The 7 1/8% senior notes due 2028 (Caa1/CCC+) fell 2 points to 56¼ bid on $6 million of volume.

The Hickory, N.C.-based network infrastructure manufacturer’s higher-rated notes also were pressured in lighter activity on Wednesday.

CommScope’s 6% senior secured notes due 2026 (B1/B) traded over 1¼ points lower at 90¼ bid on $2.3 million of volume.

Level 3 mixed

Level 3’s 4¼% senior notes due 2028 (B3/CCC+/B) fell 5/8 point to 58 3/8 bid on $7 million of trading action going out Wednesday, a source said.

The company’s 3 5/8% senior notes due 2029 (B3/CCC+/B) moved down nearly 1 1/8 points to 54¾ bid on $9 million of supply.

Meanwhile, Level 3’s 4 5/8% senior notes due 2027 (B3/CCC+/B) improved more than ¼ point to 67¼ bid in the company’s strongest traded bond over the session.

Volume hit $10 million in the issue.

Level 3 is a subsidiary of Denver-based telecommunications company Lumen Technologies, Inc., which is facing a class-action lawsuit over risks regarding its lead-covered cable infrastructure.

On Tuesday, Lumen announced it plans to wind down the company’s content delivery services and closed its sale of select content delivery network service contracts to Akamai Technologies, Inc.

Rite Aid higher

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) were quoted trading about 1½ points better around 65½ bid on $6 million of volume on Wednesday, a source said.

The bonds added 2 points in the prior session.

Rite Aid’s 7½% senior secured notes due 2025 (Caa3/C) improved more than ¾ point to around 64½ bid on $4 million of activity.

The 7.7% notes due 2027 (Ca/C) also traded at 7 bid on about $5 million of volume over the day.

Rite Aid is reportedly expected to file for Chapter 11 bankruptcy.

The company received notice on Sept. 28 that its stock is no longer in compliance with New York Stock Exchange price listing requirements.

The Camp Hill, Pa.-based drugstore chain’s shares (NYSE: RAD) were moving closer to $1 after climbing over 20% on Tuesday. Shares closed Wednesday up 9% at 82 cents.

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns jumped to 1.39% on Tuesday from minus 0.11% in the last session before the Columbus Day holiday and from minus 0.73% in the same session a week ago.

Month-to-date total return losses improved to minus 1.14% versus minus 2.49% on Friday but were down from minus 0.73% in the first session of October.

Year-to-date distressed total returns rose to 16.43% on Tuesday from 14.84% on Friday but remained soft from 16.91% a week earlier.

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