Rite Aid mixed after tender kick-off; DISH down; Talen up; distress ratio nearly doubles

By Cristal Cody

Tupelo, Miss., June 13 – Rite Aid Corp.’s bonds traded flat to about ¾ point lower on Monday after the pharmacy chain announced cash tender offers to purchase up to $150 million of its junk paper.

Rite Aid’s credit default swaps have tightened more than 400 basis points so far in June.

Paper from DISH Network Corp., Carvana Co. and Coinbase Global, Inc. sold off on Monday with the issuers down about 3½ points to over 5 points, a source said.

DISH DBS Corp.’s 5¼% senior secured notes due 2026 (Ba3/B+) slid over 4 points to the 80 bid area on $15 million of trading volume on Monday.

The sell-off in stocks continued on Monday after steep losses were sparked Friday following the Labor Department’s report that showed inflation in the United States had climbed to the highest level seen since 1981 due to steep increases for shelter, gasoline and food.

The Nasdaq, which closed Friday down 3.52%, sank 4.68% on Monday.

The S&P 500 index, which fell 2.91% ahead of the weekend, ended Monday down 3.88%.

The iShares iBoxx High Yield Corporate Bond ETF sank $2.53 to close at $73.10 after shedding $1.31 on Friday.

The “Fear Factor” VIX index soared 25% on Monday as the markets wait for the Federal Reserve’s rate decision due Wednesday.

The Chicago Board Options Exchange’s CBOE Volatility index climbed 24.86% by the close to 34.65.

Oil was slightly better.

West Texas Intermediate crude oil benchmark futures for July deliveries rose 26 cents to settle at $120.93 a barrel.

Bankrupt energy producer Talen Energy Supply LLC’s notes were up 1 point in active trading on Monday after ending the prior week lower.

In other activity on Monday, S&P Global Ratings said the U.S. distress ratio nearly doubled to 4.3% as of June 3, the highest since March 2020.

The ratio was 2.4% in the prior month, according to the release on Monday.

U.S. speculative-grade spreads have also “risen sharply in recent weeks due to a mix of growth concerns coupled with hawkish monetary policy to combat inflation,” S&P said.

CCC-rated spreads have increased 246 bps since the beginning of the year with the CCC composite spread nearing distressed territory of more than 1,000 bps, according to the release.

Retail led the increase in the distress ratio after it rose to 15.9% from 4.5% in the prior month.

Rite Aid flat to lower

Rite Aid’s 7.7% senior debentures due 2027 (Caa2/CCC/CCC) were mostly unchanged from Friday at the 63¼ bid range, a source said.

The company’s 8% senior secured notes due 2026 (B3/CCC/BB-) dipped about ¾ point to 78¾ bid in light trading activity following the company’s tender announcement on Monday.

The company announced tender offers for its 7½% senior secured notes due 2025, 8% senior secured notes due 2026, 7.7% senior debentures due 2027 and 6 7/8% debentures due 2028.

The tender offers expire July 12.

Meanwhile, Rite Aid’s credit default swaps have improved over the past two weeks.

The Camp Hill, Pa.-based drug retailer’s CDS spreads tightened 19 bps for the past week ended Wednesday to 2,749 bps, a market source said.

The CDS spreads firmed more than 400 bps in the prior week.

Talen edges up

Talen Energy’s 6½% senior notes due 2025 (/D/C) improved 1 point on Monday to 66 bid in light trading, a source said.

The notes ended Friday over 3 points lower at 65 bid after trading at the close at the 68 bid area.

The issue remains up from a low reached in April of 25½ bid.

The Woodlands, Tex., and Allentown, Pa.-based power generation and infrastructure company filed for Chapter 11 bankruptcy in May.

Distressed index soft

The S&P U.S. High Yield Corporate Distressed Bond index finished lower in the previous week.

One-day total returns declined on Friday to minus 0.95% from minus 0.35% on Thursday, minus 0.03% on Wednesday, minus 0.53% on Tuesday and a positive 0.27% return at the start of the week.

Month-to-date total returns softened on Friday to minus 1.38% versus minus 0.43% on Thursday, minus 0.08% on Wednesday, minus 0.04% on Tuesday and 0.49% at the week’s start.

Year-to-date index returns also were lower at minus 15.69% on Friday, compared to minus 14.88% on Thursday, minus 14.58% on Wednesday, minus 14.55% on Tuesday and minus 14.1% in the June 6 session.

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