Altice bonds continue to mostly decline; Lumen, Level 3 paper mixed; Telesat Canada softens

By Cristal Cody

Tupelo, Miss., April 1 – Altice France Holding Restricted Group paper continued to see the bulk of trading but in much lighter supply with the 8 1/8% senior secured notes due 2028 (Caa1/CCC+) counted among the most active issues on $8 million of volume Monday.

The notes edged higher, while the company’s other tranches mostly declined ¾ point to more than 1 point.

Overall distressed secondary action was lighter following the long holiday weekend as the primary market in both the junk and high-grade spaces heated up ahead of the March jobs report due this week.

Stock indexes were mixed with the S&P 500, Dow Jones industrial average and Russell 2000 all down, while the Nasdaq eked out 0.11% of gains.

The iShares iBoxx High Yield Corporate Bond ETF dropped 31 cents, or 0.41%, to $77.02.

The CBOE Volatility Index rose 4.92% over the session to $13.65.

The Labor Department will release the March non-farm payroll report on Friday.

“We estimate a noticeable slowdown in the pace of U.S. job creation in March, albeit to a still-solid 180k,” BNP Paribas Securities analysts said in a note Monday. “We see the unemployment rate edging down to 3.8%.”

Meanwhile, March distressed returns dropped to negative after closing out February with nearly 5% of gains.

Default activity was lighter in March with three defaults, including a distressed debt exchange from Lumen Technologies, Inc., according to a Fitch Ratings report Monday.

Bonds from Lumen and subsidiary Level 3 Financing, Inc. were mixed in light trading over the day.

Fitch said it downgraded Lumen and subsidiaries, Level 3 Parent, LLC and Level 3 Financing to restricted default and then subsequently raised the ratings of Lumen and its key borrower subsidiaries to CCC+ to reflect the new capital structure following the completion of its transaction support agreement on March 22.

“The transaction completed pursuant to the TSA was one of the largest private debt restructurings completed in the U.S. to date and encompassed participation from more than $15 billion of outstanding debt,” Fitch said. “Fitch believes the combination of the large debt balance with weak operating results calls into question the long-term sustainability of the company's capital structure, even with extended maturities.”

Looking at the distressed telecom space, Telesat Corp.’s paper moved lower following the release of earnings results last week and Monday’s announcement that it received the go-ahead for a C$2.14 billion loan from the Canadian government.

The 5 5/8% senior secured notes due 2026 (B3/D) went out in the prior week down nearly 10 points and traded Monday 1 point lower.

Altice bonds mostly lower

Altice France Holding SA’s 10½% senior notes due 2027 (Ca/CCC-) fell 1¼ points to a 36 bid handle on $4 million of trading Monday, a source reported.

Altice’s bonds have slid from a handle in the 70s after the company announced weaker quarterly results and on reports the company has hired financial and legal advisers.

The 5½% senior secured notes due 2028 (Caa1/CCC+) fell ¾ point to 70¼ bid on $7 million of volume over the day.

Posting some gains Monday, Altice’s 8 1/8% senior secured notes due 2028 (Caa1/CCC+) were less than 1/8 point better on a 78 bid handle in the most active tranche trading on $8 million of supply.

Moody’s Investors Service and S&P Global Ratings downgraded the issuer and bonds in the prior week on growing risks of a default or distressed exchange on the secured and unsecured debt.

Altice France SA and affiliate Altice USA, Inc. are listed among the 10 largest junk bond and loan issuers with amounts outstanding of $16.21 billion and $22.72 billion, respectively, according to a JPMorgan Securities LLC research report.

The telecommunications company is based in Paris.

Lumen, Level 3 mixed

Lumen’s bonds improved modestly in light trading Monday, while bonds from subsidiary Level 3 softened, a source said.

Lumen’s 4% senior secured notes due 2027 (Caa3/D) were quoted up ¼ point to 62½ bid on $1 million of volume by the close.

Level 3’s bonds were trading lower on handles in the 40s, 50s and low 60s in light activity over the day.

The issuer’s 4¼% senior notes due 2028 (Caa2/D) went out at 45¾ bid on $1 million of volume.

The bonds traded at 50¼ bid in the same session last week.

As part of the amended transaction support agreement reached with a majority group of creditors, Lumen reduced near-term debt maturities outstanding for 2025 to 2026 to $600 million from approximately $2.1 billion and total maturities outstanding for 2027 reduced to $800 million from around $9.5 billion.

The Monroe, La.-based global telecommunications company also closed a new approximately $1 billion revolving credit facility due in June 2028 and completed the private placement of $1.325 billion aggregate principal amount of senior secured notes due November 2029.

Telesat declines

Telesat Canada’s 5 5/8% senior secured notes due 2026 (B3/D) dropped 1 point to 49¼ bid on $5 million of trading in one of the more active distressed issues on Monday, sources said.

The bonds declined over 9 points in front of the Good Friday holiday to a 50 bid handle.

Telesat’s 6½% senior notes due 2027 (Caa3/D) were quoted at 38 bid on $2 million of volume over the session.

Ottawa-based parent satellite operator Telesat on Thursday reported weaker fourth-quarter and fiscal 2023 revenue and weaker fourth-quarter earnings but also announced a fiscal 2023 profit of $583.27 million after an $81.6 million loss in 2022.

Telesat announced Monday that it received a letter on Thursday from Canada’s minster of innovation, science and industry noting it will invest C$2.14 billion in Telesat Lightspeed by offering a loan to Telesat LEO Inc., a subsidiary that will own and operate the Telesat Lightspeed Low Earth Orbit global broadband satellite constellation.

The loan will carry a floating interest rate that is 475 basis points above Corra with a 15-year maturity. Telesat LEO will provide the Canadian government with warrants for 10% of the common shares of Telesat LEO based upon an equity valuation for Telesat LEO of $3 billion (in U.S. dollars).

March distressed returns weak

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns improved in the early session and last day of the short holiday week to 0.19% on Thursday, compared to negative 0.34% on Wednesday, minus 0.04% on Tuesday and negative 0.14% at the start of the prior week.

The bond markets closed early on Thursday and were closed the full day for the Good Friday holiday.

Month-to-date total returns for March ended Thursday at negative 0.47%, compared to minus 0.66% midweek, negative 0.33% Tuesday and negative 0.29% at the week’s start.

March returns declined from February but were higher than January’s negative returns. Month-to-date total returns for February were 4.88%, while January returns were negative 2.15%.

Year-to-date and first-quarter total returns ended the prior week at 2.13%.

Year-to-date returns improved from 1.94% on Wednesday, 2.28% on Tuesday and 2.32% at the week’s start.

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