CommScope recovers some of week’s losses; Level 3, Lumen volatile; Spirit Airlines up

By Cristal Cody

Tupelo, Miss., Nov. 2 – Distressed paper saw some of the day’s heaviest secondary action, market sources reported.

CommScope Holding Co., Inc.’s notes rallied 4½ points to over 9 points on more than $60 million of volume on Thursday.

The 8¼% senior notes due 2027 (Caa1/CCC+) climbed more than 9¼ points in a reversal of some of the losses from the first two sessions this week.

Level 3 Financing, Inc.’s and parent Lumen Technologies, Inc.’s paper stayed volatile on Thursday on the heels of the company’s third-quarter losses and other announcements, including debt exchange plans this week.

Level 3’s bonds were trading down about 10 points this week.

The 4 5/8% senior notes due 2027 (B3/CCC+/B) dropped 3 points going out the door on Thursday.

Meanwhile, Lumen’s credit default swap spreads have tightened more than 300 basis points over the past two weeks.

Stock indices jumped on Thursday as Treasury yields slid a second day after the Federal Reserve kept rates unchanged. The S&P 500 index closed up 1.89%.

The benchmark 10-year Treasury note yield, down 8 bps on Wednesday, declined 12 bps on Thursday to 4.67%.

The iShares iBoxx High Yield Corporate Bond ETF added 82 cents, or 1.13%, to $73.69.

The CBOE Volatility index went out more than 7% lower at 15.66.

In other distressed paper, Spirit Airlines Inc.’s 8% senior secured notes due 2025 (Ba3//BB) rallied 5 points to head out at 70½ bid and a yield just under 29%, a source said Thursday.

The issue was among the day’s most active bonds on $22.5 million of volume.

CommScope bonds jump

CommScope Technologies LLC’s 6% senior notes due 2025 (Caa1/CCC+) traded over 5 points higher at just under 73 bid on $19 million-plus of secondary action on Thursday, a source reported.

The bonds have climbed over the past two sessions after sinking at the week’s start.

The notes plunged 15¼ points on Monday to a quote of 74 bid and slid further on Tuesday to 61 bid, 63 offered.

The issue opened on Monday at 85 bid, 87 offered.

CommScope, Inc.’s 8¼% senior notes due 2027 (Caa1/CCC+) climbed over 9¼ points to 48¼ bid on $19.38 million of trading supply on Thursday.

The bonds were quoted on Tuesday at 41½ bid, 42½ offered, down from 53 bid, 54 offered on Monday and 61 bid, 62 offered ahead of the weekend.

CommScope’s 5% senior notes due 2027 (Caa1/CCC+) added 4½ points to hit 36 bid on $17.2 million of volume on Thursday.

The 7 1/8% notes due 2028 (Caa1/CCC+) also gained 7 points going out the door at 43½ bid on $8 million of trading.

The bonds were yielding from a range of 28% on the shortest tranche to 42.39% on the 2027 notes.

The paper sank after CommScope Holding reported on Monday that it expects preliminary third-quarter losses and adjusted its 2023 EBITDA forecast downward.

S&P placed the company on CreditWatch negative on Tuesday.

The Hickory, N.C.-based network infrastructure manufacturer’s shares (Nasdaq: COMM) rallied 18.51% on Thursday to $1.60.

Level 3, Lumen decline

Level 3’s 4 5/8% senior notes due 2027 (B3/CCC+/CCC+) dropped 3 points by the time the dust settled on Thursday on more than $36 million of notes changing hands, a source said.

The bonds fell 3 points to 58 bid.

The issue also was seen off 2 points at 59 bid on about $36 million of volume during the session.

In the same session a week ago, the notes were quoted at 68¼ bid.

Level 3’s 4¼% senior notes due 2028 (B3/CCC+/CCC+) traded more than 2¼ points weaker at 48 bid on $12.82 million of volume on Thursday.

The notes were down 10 points from where the issue traded at 58 bid in the same session last week.

Lumen’s 4% senior secured notes due 2027 (Caa2/B/B-) were down about 6 points on a 53 bid handle on $6.25 million of trading over the day.

The issue has softened from a 66 bid handle in the week-ago session.

The Denver-based telecommunications company reported third-quarter losses on Tuesday and a host of other announcements that rocked the paper, including plans to extend its bond maturities after reaching an agreement with creditors holding about $7 billion of its debt.

The agreement includes exchanging a portion of the outstanding senior secured and unsecured debt at Lumen and Level 3 for new debt, a move tantamount to a default if launched, S&P Global Ratings said Thursday when placing Lumen on CreditWatch with negative implications.

Fitch Ratings also downgraded Lumen and its subsidiaries on Thursday due to the debt exchange plans.

Lumen also reported on Wednesday that it closed on the sale of its European, Middle Eastern and African business to Colt Technology Services for $1.8 billion in cash.

Lumen’s CDS spreads have tightened more than 300 bps over the past two weeks.

The company’s CDS spreads firmed 99 bps over the past week ended Wednesday to 3,492 bps, according to a report from Moody’s Investors Service.

In the prior week, Lumen’s CDS spreads were 212 bps tighter.

Distressed returns down

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns opened November lower after ending Wednesday at minus 1.26%, down from minus 0.82% on Tuesday and minus 0.49% on Monday.

Month-to-date total returns for November so far totaled minus 1.26% after the first session. October total returns were minus 6.17%.

Year-to-date distressed total returns dropped to 9.11% on Wednesday from 10.5% on Tuesday and 11.42% on Monday.

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