Rite Aid secondary interest continues, bonds up; Bausch Health mixed; AMC soft on week

By Cristal Cody

Tupelo, Miss., Oct. 19 – Rite Aid Corp.’s 8% senior secured notes due 2026 (/D/CC) have been among the most active high-yield bonds in the last three sessions as the paper pulls in interest from other junk bonds, market sources reported Thursday.

The bonds were nearly ½ point better on the day on $20.5 million of paper traded.

In the prior session, Rite Aid’s notes jumped 3½ points on almost $30 million of volume.

The notes have improved more than 5 points since the issuer reported on Monday that it filed for Chapter 11 bankruptcy.

Rite Aid’s credit default swap spreads also came in more than 33,000 basis points this week.

Market tone declined further on Thursday with stock indices down following Federal Reserve chairman Jerome Powell’s comments. The S&P 500 index fell 0.85%.

The iShares iBoxx High Yield Corporate Bond ETF shed 26 cents, or 0.36%, to $71.78.

The CBOE Volatility index climbed 11.34% to 21.4.

The benchmark 10-year Treasury note yield was nearing 5%, the highest since 2006, after climbing 8 bps on Thursday to 4.98%.

The health care space remained under pressure in distressed names over the session.

Bausch Health Cos. Inc.’s notes traded flat to about ½ point lower in active supply.

The 8½% senior notes due 2027 (Ca/CCC-/C) went out unchanged.

Elsewhere, AMC Entertainment Holdings, Inc.’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) were quoted down about 1¾ points this week.

Current second-lien debt “is as risky as unsecured bonds,” Moody’s Investors Service said in a report on Wednesday.

“Based on our loss-given-default assessments, the average expected recovery rate for currently rated second-lien debt is only 15% in the event of default,” Moody’s said. “A deterioration in both second-lien debt recovery expectations and in already realized recoveries post-default reflect a growing share of aggressive ‘loan-only’ capital structures.”

Moody’s also said its B3 negative and lower corporate ratings list continued to grow in the third quarter “and is poised to increase further, as weaker debt issuers struggle with a more expensive debt.”

At the end of September, the list included 240 companies with services, consumer products and health care companies the top three sectors.

Rite Aid higher

Rite Aid’s 8% senior secured notes due 2026 (/D/CC) went out at just under 71 bid and a 20.48% yield on $20.5 million of paper changing hands on Thursday, a source said.

The notes were nearly ½ point better on the day and at the top of the session’s most active junk bonds.

On Wednesday, the issue picked up 3½ points on $28.9 million of volume.

Rite Aid’s 7½% senior secured notes due 2025 (/D/CC) climbed 1¾ points on Thursday to 71½ bid and around a 29% yield on $5 million of secondary action.

In the prior session, the notes jumped 2¾ points on $9.76 million of volume.

The 7.7% debentures due 2027 (/D/C), yielding over 103%, also added 1 1/8 points to a print of 11.60 on $1.25 million of trading Thursday.

The bonds added around 2¾ points on $2 million of activity the previous day.

Meanwhile, Rite Aid’s CDS spreads came in more than 33,000 bps this week after the bankruptcy filing.

Rite Aid’s CDS spreads tightened 33,416 bps over the past week ended Wednesday to 25,968 bps, according to a Moody’s report.

The CDS spreads had gapped out to nearly 60,000 bps in the prior week ahead of the Philadelphia-based retailer’s weekend filing.

Bausch mostly lower

Bausch Health Americas, Inc.’s 8½% senior notes due 2027 (Ca/CCC-/C) went out unchanged on Thursday at 47¼ bid on $4 million of secondary activity, a source said.

Other paper was soft. Bausch Health Cos.’ 5¼% senior notes due 2030 (Ca/CCC-/C) declined about ½ point to just under 59 bid in lighter trading totaling $2 million.

The issuer’s 6 1/8% senior secured notes due 2027 (Caa1/CCC+/B) also were off ¼ point at 36¼ bid on $2 million of secondary activity.

In September, Bausch announced that its chief financial officer had resigned and a formal search for a replacement is underway.

Bausch is facing issues including a securities class action lawsuit over alleged violations of federal securities laws and pushback against its plans to spin off Bausch + Lomb Corp.

The Laval, Quebec-based pharmaceutical company will report third-quarter earnings results on Nov. 2.

AMC bonds soft

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) were drifting lower with the issue down about 1¾ points this week at 77¾ bid, a source said.

The bonds traded at 79½ bid a week ago.

AMC’s notes were among the most traded distressed bonds seen moving on Thursday, a source said. Volume totaled $7.75 million.

The Leawood, Kan.-based movie theater owner’s stock (NYSE: AMC) finished up 2.19% to $9.36.

Distressed returns weak

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns improved on Wednesday to minus 0.37%, compared to minus 1¼% on Tuesday, but remained weaker from minus 0.17% on Monday.

Month-to-date total returns declined midweek to minus 3.25% from minus 2.89% on Tuesday and minus 1.66% at the start of the week.

Year-to-date distressed total returns moved lower to 13.94% on Wednesday from 14.36% on Tuesday and 15.81% on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.