WW International notes up in distressed trading; AMC flat; Michaels sees strong demand

By Cristal Cody

Tupelo, Miss., March 12 – WW International Inc.’s distressed 4½% senior secured notes due 2029 (B3/B) climbed ½ point in heavy trading that put it among the most active junk bonds in the secondary market on Tuesday.

Volume hit $12 million in the issue by the close.

WW’s bonds have given back about 20 points since December.

Shares hit a new 52-week low over the session.

On Monday, law firm Bronstein, Gewirtz & Grossman, LLC announced that it is investigating potential claims on behalf of purchasers of WW International securities over possible federal securities law violations.

The WeightWatchers owner in late February announced a slew of changes, including that longtime board member Oprah Winfrey planned to exit the board in May.

Overall markets were mostly stronger on Tuesday with volatility on the retreat following the release of the Labor Department’s February Consumer Price Index, which increased a seasonally adjusted 0.4% after rising 0.3% in January. The all-items index increased 3.2% over the last 12 months.

“While core CPI surprised to the upside for the second straight month in February, the details were somewhat more benign than the rounded print may suggest,” according to a BNP Paribas Securities note. “Specifically, sequential shelter inflation fell substantially, allaying fears that January’s strong print may be the new normal through H1 2024.”

BNP analysts said Tuesday’s print supports its above-consensus expectation for the CPI figure to rise by 3% in the fourth quarter “versus market pricing that was close to 2.6% heading into today’s release.”

Stock indices mostly rallied while Treasury yields rose. The S&P 500 index closed up 1.12%, and the Nasdaq finished 1.54% higher.

The iShares iBoxx High Yield Corporate Bond ETF added 7 cents, or 0.09%, to $77.46.

The CBOE Volatility index moved back over 9% to 13.84.

The benchmark 10-year Treasury note yield rose 5 basis points to 4.15%.

“February’s inflation data showed a slight acceleration,” Consumer Investment Management analysts said in a note Tuesday. “This modest increase in headline inflation might not be enough to deter policymakers from holding steady in March, but it leaves the possibility open for a summer adjustment.”

AMC Entertainment Holdings, Inc.’s paper steadied in light trading ahead of the company’s federal civil lawsuit settlement announcement after the markets closed Tuesday.

The 7½% senior secured first-lien notes due 2029 (Caa1/B-) were flat on just $1 million of secondary action reported by the end of the day.

Distressed arts and crafts retailer Michaels Cos, Inc.’s 7 7/8% senior notes due 2029 (Caa2/CCC-) saw the heaviest secondary action over the session with $18 million of bonds changing hands by the close.

The notes went out 5/8 point better.

WW notes trade higher

WW International’s 4½% senior secured notes due 2029 (B3/B) climbed ½ point to 43½ bid on $12 million of paper traded on Tuesday, a source said.

The notes have given back about 20 points since December.

The issue ended 2023 at 66½ bid and opened 2024 with a 64 handle.

In Monday’s press release, Bronstein, Gewirtz & Grossman encouraged investors who have purchased WW securities to assist in the investigation, which “concerns whether Weight Watchers has violated federal securities laws.”

The firm cited the company’s earnings announcement on Feb. 28 when it issued results and full-year guidance “that missed expectations. The company also revealed that Oprah Winfrey will not stand for re-election at its upcoming annual shareholders meeting after serving on the board since 2015. Following this news, Weight Watchers stock dropped roughly 20% during intraday trading on February 29.”

WW reported Feb. 28 fourth-quarter revenue declined 8.7% while quarterly losses climbed to $88.1 million from $35.8 million a year earlier.

Fiscal 2023 revenue was down 14.5%, though yearly profit losses improved to $112.3 million from $256.9 million in 2022.

WW announced fiscal 2024 revenue guidance of $830 million to $860 million, while operating income is expected to be in the range of $100 million to $110 million.

The company said fourth-quarter subscribers rose 7.1% versus the same quarter a year ago.

In the Feb. 28 announcement, Winfrey reported she will continue to collaborate with WeightWatchers but plans to donate her stock and stock options to the National Museum of African American History and Culture in part to “eliminate any perceived conflict of interest around her taking weight loss medications.”

In 2023, WW completed the $132 million cash and equity acquisition of telehealth platform Weekend Health, Inc., dba Sequence, as well as appointed new board members.

The company has faced several pitfalls in 2024, including rival service providers for the latest round of weight loss drugs.

The New York-based WeightWatchers operator’s stock (Nasdaq: WW) closed down 6.97% to $2.67 on Tuesday after hitting a new 52-week low during the session of $2.66. The stock’s 52-week high was $13.31.

AMC notes flat

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) went out flat at 69¼ bid on just $1 million of trading on Tuesday, a source said.

The issue spent Monday’s session trading ½ point lower on $2 million of supply.

AMC announced on Tuesday that it will receive $3.3 million in a proposed settlement from a federal civil lawsuit filed in the U.S. District Court of the Southern District of New York by AMC shareholders Dennis J. Donoghue and Mark Rubenstein for AMC.

AMC said it is party to the suit in name only, and the lawsuit was brought for it to “recover so-called ‘short-swing’ profits” under Section 16(b) of the Securities Exchange Act of 1934.

The profits were alleged to have been gained by defendants Antara Capital Master Fund LP, Antara Capital Fund GP LLC, Antara Capital LP, Antara Capital GP LLC and Himanshu Gulati in connection with their purchases and sales of AMC securities.

A hearing to approve the proposed settlement dated March 8 is set for May 2.

If the hearing is approved, AMC said it will receive $3.3 million from the defendants.

On Monday, the company reported positive news regarding its new popcorn products that are now available for sale at additional companies including Kroger Co. and Publix Super Markets, Inc. after nearly a year of product availability exclusively at Walmart Inc.

AMC in February reported higher fourth-quarter and fiscal 2023 revenue and improved net losses.

The Leawood, Kan.-based movie theater company’s stock (NYSE: AMC) fell 2 cents to $4.34 in light trading.

Michaels improves

Michaels’ 7 7/8% senior notes due 2029 (Caa2/CCC-) climbed 5/8 point to 70 1/8 bid going out Tuesday in strong trading volume that topped $18 million, a source said.

The issue has climbed from where it was quoted Feb. 20 with a 60 bid handle.

The Irving, Tex.-based arts and crafts retailer was taken private in 2021 by funds managed by Apollo Global Management, Inc. affiliates.

Distressed index returns up

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns came to 0.18% on Monday.

Month-to-date total returns for March totaled 1.17% at the start of the week.

Year-to-date total returns climbed Monday to 3.82% from 3.63% on Friday.

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