Talen notes, CDS spreads improve; Rite Aid lower; Staples bonds, CDS spreads soften

By Cristal Cody

Tupelo, Miss., May 5 – Distressed paper quoted Thursday ended mixed in light trading after the financial markets reversed course with CommScope Holding Co., Inc.’s junk bonds among the day’s most active issues.

Equities sank with the S&P 500 index closing off 3.56% and the Nasdaq Composite down 4.99% after gaining on Wednesday following the Federal Reserve’s largest interest rate hike in over two decades.

The Fed raised the target range for the Federal Funds rate by 50 basis points to ¾% to 1%.

The iShares iBoxx High Yield Corporate Bond ETF dropped $1.39 to end Thursday at $78.05.

The Chicago Board Options Exchange’s CBOE Volatility index climbed 23.68% to 31.44 by the session’s close.

Oil prices finished modestly higher after gaining over $5 in the prior session.

West Texas Intermediate crude oil benchmark futures for June deliveries rose 45 cents to settle Thursday at $108.26 a barrel.

In the distressed energy space, Talen Energy Supply LLC’s 10½% senior notes due 2026 saw back-to-back gains with the issue up 4 points after gaining 3 points on Wednesday.

The company’s credit default swap spreads also came in over 300 bps for the week.

Meanwhile, Rite Aid Corp.’s notes traded about 1 point to over 2 points weaker on Thursday.

The drugstore chain’s CDS spreads widened nearly 150 bps over the past week.

Staples Inc.’s 10¾% senior notes due 2027 also dropped about 2¾ points, and its CDS spreads widened over 60 bps this week.

Talen notes up

Talen’s 10½% senior notes due 2026 (C/CC/CCC) moved 4 points higher to 44 bid in the secondary market on Thursday, a source said.

The notes were quoted up 3 points in Wednesday’s session at 40 bid, 41 offered.

Talen’s bonds have gained about 7 points over the week.

The company’s CDS spreads also tightened over the past week ended Wednesday, a market source said.

The Woodlands, Tex., and Allentown, Pa.-based power generation and infrastructure company’s CDS spreads firmed 306 bps to 6,061 bps.

Rite Aid drops

Rite Aid’s secured paper, along with its CDS spreads, have been soft this week, sources reported.

The company’s 8% senior secured notes due 2026 (B3/CCC/BB-) fell over 1½ points to 81½ bid on Thursday.

The notes are down about 2½ points so far in May after declining about 8 points in April.

The Camp Hill, Pa.-based drug retailer’s CDS spreads also eased 141 bps for the week ended Wednesday to 2,162 bps.

Staples paper declines

Staples’ 10¾% senior notes due 2027 (Caa2/CCC+) declined about 1¼ points over Thursday’s session, heading out at the 85¾ bid area, a source said.

The notes have dropped about 2¾ points since the start of May.

The Framingham, Mass.-based office supply chain’s CDS spreads also softened 64 bps over the past week ended Wednesday to 1,214 bps, a market source said.

Distressed returns soft

S&P U.S. High Yield Corporate Distressed Bond index returns declined on Wednesday and have been mostly underwater so far in May.

One-day total returns were minus 0.42% on Wednesday, compared to 0.28% on Tuesday and minus 0.72% on Monday.

Month-to-date total returns in the first three sessions of the month were minus 0.85% on Wednesday, minus 0.44% on Tuesday and minus 0.72% at the week’s start.

Year-to-date index returns softened on Wednesday to minus 8.67% from minus 8.29% on Tuesday and minus 8.55% on Monday.

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