Level 3 bonds erratic; AMC paper shakes off midweek pressure; iHeartCommunications up

By Cristal Cody

Tupelo, Miss., Feb. 29 – Level 3 Financing, Inc.’s paper has been fairly volatile over the last few sessions as parent Lumen Technologies, Inc. faced an initial Thursday deadline to complete its transaction support agreement amended in January.

“I have been asking that question myself,” a trader said of the moves. “Today, it’s down 18 points.”

Level’s 3¾% senior notes due 2029 (Caa2/CC) slid 17½ points on the day.

On Wednesday, the bonds were up 16¼ points.

“The volume is above average,” the trader said. “$6 million – that’s decent.”

The company’s bonds have been pressured over the month since parent Lumen Technologies reported in January an amended transaction support agreement reached with a majority group of creditors.

“If the proposed debt exchanges are consummated, which seems likely, Lumen will have successfully pushed out and smoothed out its debt maturity profile, eliminating what had been a (perhaps insurmountable) 2027 maturity wall,” MoffettNathanson LLC analyst Nick Del Deo said in a note released Thursday to Prospect News.

The added runway “comes at a very steep cost,” with Lumen’s blended borrowing rate to increase by about 140 basis points and around $250 million of additional annual interest expense, Del Deo said.

Level 3’s debt is expected to increase by about $1.6 billion, while debt at Lumen and subsidiary Qwest is set to decline by about $2.1 billion, according to the report.

AMC Entertainment Holdings, Inc.’s bonds shook off losses on Wednesday to improve around 1 point to nearly 3 points in the first session after the company posted fourth-quarter and fiscal 2023 earnings.

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/D) added 2¾ points after giving back 1½ points on Wednesday.

Stocks were up after stronger economic data raised hopes of a summer rate cut by the Federal Reserve.

“The market was somewhat firm,” a trader said. “The CDX was up 14 cents and HYG was about the same.”

The S&P 500 index rose 0.52%, while the iShares iBoxx High Yield Corporate Bond ETF improved 14 cents, or 0.18%, to $77.33.

The CBOE Volatility index moved back 3.2% on the day to 13.40.

The benchmark 10-year Treasury note yield declined to 4¼%, down 2 basis points after dropping 4 bps on Wednesday.

“The market is just being data-driven,” a fixed income source said. “People are trying to gauge what the Fed’s going to do.”

In one of the day’s economic reports that spurred talk of a summer rate cut, the Commerce Department reported that January personal consumption expenditures rose 0.2%, down from 0.7% in December.

Inflation data over the past month had come in higher than analysts expected and put a dash to anticipation of rate cuts in the front half of the year.

“People had to reset their expectations on the timing of cuts, and they’re going to continue to look at a combination of Fed speak and data to try to really gauge which way the market’s going,” the fixed income source said. “There’s maybe a little bit of relief in the number today that didn’t continue the trend of inflation data that was a little bit higher than people’s expectations.”

In other secondary action, iHeartCommunications, Inc.’s paper traded around 1¼ points to 4 points better after parent iHeartMedia, Inc. posted weak earnings, while the stock climbed over 20%.

iHeartCommunications’ 5¼% senior secured notes due 2027 (Caa1/B+) rallied 4 points on more than $15 million of volume.

Level 3, Lumen active

Level 3’s 3¾% senior notes due 2029 (Caa2/CC) were quoted after the close at 41 bid, down 17½ points, on Thursday, a source said.

Wednesday’s session saw the notes up 16¼ points.

Lumen’s 4% senior secured notes due 2027 (Caa3/CC) traded up nearly 1 point to 60½ bid during the session, while the issuer’s 4¼% senior notes due 2029 (Ca/CCC-) were quoted on Thursday at 31½ bid.

Lumen reported on Jan. 25 that it reached an amended TSA with subsidiaries Level 3 Financing and Qwest Corp. that has support from a majority group of creditors.

The amended support agreement calls for transactions in the first quarter that include $1.33 billion in new-money long-term senior secured first-lien debt by Level 3, an approximately $1 billion new revolving credit facility at Lumen, the extension of maturities to mostly 2029 and beyond and the repayment of certain of Lumen’s and Qwest’s debt.

The outside date of completion for the transaction support agreement was Thursday, though Lumen previously reported it may extend it to March 31.

The Monroe, La.-based global telecommunications company expects to complete the transactions in the first quarter.

Lumen’s shares (NYSE: LUMN) were little changed on the day, closing up 1 cent at $1.62.

AMC picks up

AMC’s paper has see-sawed over the week but improved on Thursday after falling in the prior session.

“They were up; they were down,” a trader said.

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/D) jumped 2¾ points to 79¼ bid on $22.3 million of volume on Thursday.

The issue had dropped 1½ points in the prior session to 76½ bid and traded as low as 75 bid.

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) were up 1 point at 69 1/8 bid on $6 million of supply.

The notes were around 1/8 point lower by the close on Wednesday.

AMC reported the previous day higher fourth-quarter and fiscal 2023 revenue and improved net losses.

The Leawood, Kan.-based movie theater company’s stock (NYSE: AMC) ended the session down 13.42% at $4.32 in heavy trading.

iHeart higher

iHeartCommunications’ 4¾% senior secured notes due 2028 (Caa1/B+) climbed over 2½ points to 72 bid on more than $22 million of paper traded on Thursday, a source said.

The bonds were seen Monday mostly flat at 70½ bid.

iHeartCommunications’ 5¼% senior secured notes due 2027 (Caa1/B+) also rallied 4 points to 74¾ bid on more than $15 million of volume by the end of the session.

The issue was quoted at the week’s start mostly unchanged at the 72½ bid area.

iHeartCommunications’ 8 3/8% senior notes due 2027 (Caa3/CCC+) jumped 3½ points to 59½ bid on more than $18 million of supply on Thursday.

The issue traded Monday about ¼ point higher at 57¼ bid.

iHeartMedia on Thursday said fourth-quarter revenue declined 5.2%, slightly better than the guidance range of being down in the high single digits.

Fiscal 2023 revenue declined 4%.

Fourth-quarter GAAP operating income fell to $80 million from $173 million in the fourth quarter of 2022.

iHeart said it had a fiscal 2023 GAAP operating loss of $797 million related to $965 million of non-cash impairment charges, compared to income of $57 million in 2022.

The company gave guidance on its first-quarter consolidated adjusted EBITDA, which is expected to be $100 million to $110 million, up from $93 million in 2023.

The San Antonio-based radio operator’s stock (Nasdaq: IHRT) closed the day up over 22% at $2.77 after climbing as high as $3.04 during the session.

Distressed index positive

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns settled Wednesday at 0.22%, compared to 1.51% on Tuesday and 0.2% on Monday.

Month-to-date total returns hit 4.6% midweek versus 4.37% on Tuesday and 2.81% at the start of the week.

Year-to-date total returns rose to 2.35% on Wednesday from 2.12% on Tuesday and 0.6% on Monday.

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