Ardagh distressed bonds jump on financial results; Staples up after outlook change

By Cristal Cody

Tupelo, Miss., Feb. 22 – Distressed issues were moving on Thursday on topical news, including Ardagh Group SA’s bonds that rallied as much as 8 points in busy trading after the company announced heavy fourth-quarter losses.

Ardagh’s bonds led trading of distressed bonds and were yielding over 13%, a source said.

The 6½% senior secured notes due 2027 (Caa3/B-) jumped 8 points on more than $15 million of volume.

Staples Inc.’s 10¾% senior notes due 2027 (Caa2/CCC) climbed 5/8 point following an outlook change to negative for the office supplies retailer.

Credit default swap spreads in the issuer also tightened a second week in a row.

Stocks rallied while the benchmark 10-year Treasury note yield was mostly unchanged at 4.32% following surprise stronger economic data a day after the Federal Reserve released the minutes from its January meeting.

The S&P 500 index closed 2.11% higher, while the Nasdaq finished up 2.96%.

The iShares iBoxx High Yield Corporate Bond ETF added 37 cents, or 0.48%, to $77.30.

The CBOE Volatility index moved off more than 5% on the day to 14.54.

Initial unemployment claims for the week ended Feb. 17 declined more than expected to a seasonally adjusted 201,000, lower than the 216,000 market analysts anticipated, a source said.

“Stickier-than-expected inflation data has pushed out the expected rate cuts from the Federal Reserve to later this year,” according to a KBRA research note on Thursday. “In hawkish Fed minutes released yesterday, officials signaled concern over cutting interest rates too quickly rather than the risk of holding them too high for too long. The yield on the 10-year Treasury has climbed about 44 basis points to 4.32% since the beginning of the year.”

Ardagh paper jumps

Ardagh Finance SA’s 6½% senior secured notes due 2027 rallied 8 points to 47 bid on more than $15 million of notes changing hands on Thursday, a source said.

The yield was 34.31%.

Ardagh Packaging Finance plc’s 5¼% senior notes due 2027 (Caa1/CCC+) jumped 4¾ points to 5 7/8 points to trade at the 73¼ bid to 73 7/8 bid range on over $24 million of secondary volume. The notes were yielding over 15%.

Ardagh Group announced on Thursday fiscal 2023 losses of $495 million versus a $290 million loss a year ago.

Subsidiary Ardagh Metal Packaging SA reported on Thursday a $56 million fourth-quarter loss following a $12 million profit in the same quarter of 2022.

Fiscal 2023 losses totaled $50 million, down from a $237 million profit a year earlier.

Shares (NYSE: AMBP) in the Luxembourg-based metal and glass packaging company dropped 9.41% on Thursday to $3.56.

Staples notes up

Staples’ 10¾% senior notes due 2027 (Caa2/CCC) were up 5/8 point at 78 5/8 bid on $5.5 million of volume going into the close on Thursday, a source said.

The trading came after Moody’s Investors Service said during the session it changed the outlook on Staples to negative from stable, noting a high refinancing risk from the company’s heavy debt load due in September and in 2026.

The senior notes have picked up from trading in December on a 67 bid handle.

Staples’ CDS spreads firmed a second consecutive week, according to a Moody’s report.

The CDS spreads tightened 29 bps in the week ended Wednesday to 1,416 bps. The company’s spreads were 66 bps tighter in the prior week.

The Framingham, Mass.-based office products retail company is owned by private equity firm Sycamore Partners.

Distressed index dips

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns dropped midweek to minus 0.33% from 0.37% on Tuesday at the start of the short holiday week.

Month-to-date total returns dropped to 1.14% on Wednesday from 1.48% on Tuesday.

Year-to-date total return losses widened to negative 1.04% from minus 0.71% at the week’s start.

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