WeWork bonds decline; Bausch Health paper recovers Friday losses; distressed returns soften

By Cristal Cody

Tupelo, Miss., Dec. 18 – Distressed paper traded in lighter active on Monday in favor of new junk issues and higher-rated junk bonds, according to market sources.

Bankrupt WeWork Inc.’s 7 7/8% notes due 2025 (D) dropped over 2 points over the session in one of the more active deep distressed names.

Elsewhere, Bausch Health Cos. Inc.’s 11% senior secured first-lien notes due 2028 (Caa1/CCC+/B) recovered Monday after shedding more than 1 point Friday, though overall trading supply stayed light as the final pre-holiday week kicked off.

Overall market tone stayed stronger Monday as trading desks start to clear ahead of the holidays.

The S&P 500 index finished the day 0.45% better, while the Nasdaq added 0.62%.

The iShares iBoxx $ High Yield Corporate Bond ETF picked up 5 cents, or 0.06%, to $76.98.

Measured market volatility increased slightly. The CBOE Volatility Index rose 2.28% to 12.56.

WeWork paper erodes

Looking at deeply distressed bankrupt paper, WeWork’s 7 7/8% notes due 2025 dropped over 2¼ points to trade at 10 cents Monday, a source said.

The issue had $1.4 million of secondary supply during the session.

WeWork’s bond yield has soared to 2,811.92%.

The New York-based office share company filed for Chapter 11 bankruptcy on Nov. 6 and has entered into a restructuring support agreement with investor SoftBank Group Corp. and holders of about 92% of the company’s first-, second- and third-lien notes.

Bausch notes improve

Bausch's 11% senior secured first-lien notes due 2028 added about 1 1/8 points Monday to a print of 70.377, a source reported.

The issue was one of the more active distressed names in the junk space on $3.5 million of trading volume.

On Friday, the bonds gave back more than 1 point to head out at 69¼ bid on $11.63 million of volume.

The Laval, Quebec-based pharmaceutical company has been under duress with issues that include a securities class action lawsuit over alleged violations of federal securities laws and concerns with its plans to spin off Bausch + Lomb Corp.

Distressed index pares gains

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns declined Friday to minus 0.03% from 2.76% on Thursday, 0.4% on Wednesday, 0.38% on Tuesday and 0.14% at the start of the prior week.

Month-to-date total returns slipped to 5.64% at the close Friday versus 5.67% Thursday, 2.83% Wednesday, 2.43% Tuesday and 2.04% in the first session of the previous week.

Year-to-date distressed total returns softened to 21.52% ahead of the weekend, compared to 21.56% Thursday, 18.29% Wednesday, 17.82% Tuesday and 17.37% at the week’s start.

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