Rite Aid ramps higher in secondary focus; deep distressed names mostly quiet in October

By Cristal Cody

Tupelo, Miss., Oct. 18 – Rite Aid Corp.’s bonds continued to attract heavy attention on Wednesday in the secondary market.

Rite Aid’s 8% senior secured notes due 2026 (Ca/D/CC) picked up 3½ points on almost $30 million of volume and were trading about 5 points better since the issuer reported it filed for Chapter 11 bankruptcy on Sunday.

Rite Aid’s other notes also added around 2¾ points by the close on nearly $12 million of secondary action.

Stocks tanked on Wednesday as earnings releases from high-grade financial issuers on Wednesday dominated market focus and Treasury yields climbed 4 basis points to 6 bps by midday in the session after a strong September retail report renewed chances for another interest rate hike this year.

The S&P 500 index closed down 1.34%, while the iShares iBoxx High Yield Corporate Bond ETF declined 35 cents, or 0.48%, to $72.04.

Measured market volatility had risen more than 10% during the session before pulling back by the close. The CBOE Volatility index was up 7.49% at 19.22.

The benchmark 10-year Treasury note yield closed up 5 bps to 4.9%, while the 30-year bond yield moved past 5% by midday before finishing up 4 bps to 4.99%.

The 20-year Treasury bond yield “was awarded a 5.24% yield and the 30-year kind of followed suit,” a source said Wednesday. “The 20-year has always been the cheapest but the 30-year did go pretty close to 5% today. Cash management people are putting money into bills mainly yielding about the same 5½% range. People are putting hordes of money at those levels and not really looking to extend out very much.”

Bonds in deep distressed territory are barely moving in October, according to market sources on Wednesday.

Spanish Broadcasting System Inc.’s 9¾% senior secured notes due 2026 (Caa1/CCC+) remained quiet after the company reported a breach-of-contract lawsuit over a $64 million acquisition.

Bonds from Audacy, Inc. and WeWork Inc. also have been thinly traded since the companies missed interest payments this month.

Rite Aid higher

Rite Aid’s 8% senior secured notes due 2026 (Ca/D/CC) picked up 3½ points to head out Wednesday at 70½ bid on $28.9 million of volume, a source reported.

The bonds were already heavily traded early in the session with $25 million of volume already seen by midday, another source said.

Following Rite Aid’s bankruptcy announcement on Monday, the issue had dropped 3 points to around 62½ bid, 63½ offered.

Rite Aid’s other notes also gained around 2¾ points by the close Wednesday.

The 7½% senior secured notes due 2025 (Ca/D/CC) jumped 2¾ points to 69¾ bid on $9.76 million of volume.

Rite Aid’s 7.7% debentures due 2027 (C/D/C) improved around 2¾ points to just under 10½ bid on $2 million of trading.

The Philadelphia-based retailer’s paper has been volatile on the heels of the bankruptcy announcement.

SBS little traded

Spanish Broadcasting System’s 9¾% senior secured notes due 2026 (Caa1/CCC+) have seen little movement so far in October and remained quiet on Wednesday after the company reported a lawsuit after an acquisition fell through.

The bonds were last seen in the prior week on a 68 bid handle, down over ½ point from September’s end, a source said.

The issue has been moving with a 60s handle since declining from a year-to-date high in the 75 bid area in February.

Spanish Broadcasting reported on Wednesday that it has filed a lawsuit against VOZ Media, Inc. and company executives over a breach-of-contract agreement to acquire Mega TV from SBS for $64 million.

The lawsuit filed in the Eleventh Judicial Circuit in Miami-Dade County alleges that after nearly a year of negotiations and due diligence, VOZ failed to close the transaction but secured intimate access to SBS's proprietary and confidential information.

Miami-based Spanish Broadcasting owns the Mega TV network television operation and radio stations in the United States.

Audacy slightly better

Also in the radio space, Audacy’s 6½% senior secured second-lien global notes due 2027 (Caa3/C) were trading up ¾ point in the 2 bid area in thin activity on Wednesday, a source said.

The company’s 6¾% senior secured second-lien global notes due 2029 (Caa3/C) have been mostly quiet this month and were last seen at the 1¾ bid area.

The Philadelphia-based radio broadcaster’s subsidiary, Audacy Capital Corp., is in a grace period after skipping an $18 million interest payment on the 2029 notes that was due Oct. 2.

WeWork quiet

WeWork’s 7 7/8% senior notes due 2025 (CCC-/C) have been stuck around 3 bid in thin trading in October so far, a source said Wednesday.

The bonds were quoted at 31 bid, 33 offered back on Aug. 8 before the company’s dismal second-quarter earnings announcement and reported doubts about its ability to continue as a going concern.

WeWork’s 15% senior secured notes due 2027 (CCC+/CC) were last seen in the prior week at 47 bid, down nearly 3 points from September.

On Oct. 2, the New York-based office share company skipped $37.3 million of interest payments due on its first-, second- and third-lien notes with 2027 maturities.

Distressed index drops

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns slid on Tuesday to minus 1¼% from minus 0.17% on Monday.

Month-to-date total returns softened to minus 2.89% versus minus 1.66% at the week’s start.

Year-to-date distressed total returns slipped to 14.36% in the prior session from 15.81% on Monday.

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