Rite Aid up, CDS spreads firm; Staples mixed; Nabors softens in June; Beazer Homes pressured

By Cristal Cody

Tupelo, Miss., June 24 – Rite Aid Corp.’s unsecured and secured paper climbed in secondary trading Friday, a day after the company reported a wide first-quarter earnings loss.

Rite Aid’s credit default swaps also came in nearly 300 basis points this week.

In other distressed retail paper, Staples, Inc.’s senior notes were mixed, while its CDS spreads eased 75 bps over the week.

Friday’s session ended mostly on a stronger note with market volatility lower and the S&P 500 up 3.06%.

The iShares iBoxx High Yield Corporate Bond ETF closed 53 cents higher at $75.04.

Energy bonds were mixed as crude oil prices climbed after ending Thursday lower.

West Texas Intermediate crude oil benchmark futures for August deliveries settled $3.35 higher at $107.62 a barrel.

Nabors Industries, Inc.’s bonds improved Friday, though its CDS spreads eased more than 75 bps this week.

In other names under pressure, Beazer Homes USA, Inc.’s bonds and CDS spreads have weakened over the back half of June.

The company’s 7¼% senior notes due 2029 (B3/B) were about 1¼ points lower on the week and down more than 10 points since May.

Beazer Home’s CDS spreads have widened over 200 bps in the last two weeks.

The construction and building space has been the largest contributor to defaults this year, Moody’s Investors Service said in a report on Friday.

Of the 39 corporate defaults seen through May, nine were from the building sector, Moody’s said.

The trailing 12-month global speculative-grade corporate default rate is forecast to rise to 2.8% by the end of 2022 and climb to 3.3% by May 2023, according to the report.

Secondary action remained high this week in investment-grade paper trading with handles in the 70s and 80s in June, according to market sources.

AT&T Inc.’s 3.55% notes due 2055 (Baa2/BBB) were quoted in the 75 bid area and yielding over 5% on Friday, a source said.

The bonds moved into the 70s range in April.

Rite Aid higher

Rite Aid’s 8% senior secured notes due 2026 (B3/CC/BB-) jumped 2¼ points to 82¼ bid on $5 million of paper traded Friday, a source said.

Rite Aid’s 7.7% senior debentures due 2027 (Caa2/CC/CCC) also were over 2¾ points higher near the 68 bid to 69 bid range in thin trading.

The Camp Hill, Pa.-based drug retailer’s CDS spreads also improved this week. Spreads tightened 290 bps over the past week ended Wednesday to 2,435 bps, a market source said.

On Thursday, Rite Aid reported a first-quarter earnings loss of $110.2 million, or $2.03 per share, wider than the $13.1 million, or 24 cents per share, loss reported in the same period a year ago.

Earlier in June, Rite Aid announced tender offers to purchase up to $150 million of 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.

Staples mixed

Stapless’ notes were mixed Friday, while its CDS spreads softened this week, sources said.

The company’s 7½% senior secured notes due 2026 (B3/B) climbed 2¼ points during the session to the 88 bid area on light volume of $1 million.

The issue was up more than 2 points from a week ago.

Staples’ 10¾% senior notes due 2027 (Caa2/CCC+) were quiet and last active on Thursday in heavy supply at 71¼ bid, down 1 5/8 points this week.

The Framingham, Mass.-based office supply chain’s CDS spreads were 75 bps wider over the past week ended Wednesday at 1,933 bps, a source said.

Nabors lower in June

In the energy space, Nabors Industries’ 5¾% senior notes due 2025 (Caa2/CCC/CCC-) rose about 1¾ points Friday to 92½ bid, about 1 point softer on the week, a source said.

The bonds have declined about 5 points since May.

The Bermuda- and Houston-based oil and gas drilling contractor’s CDS spreads were softer this week.

Nabors’ CDS spreads widened 85 bps to 683 bps in the past week ended Wednesday, a market source said.

Beazer softens

Meanwhile, Beazer Home’s 7¼% senior notes due 2029 (B3/B) were more than 1 point better and trading at a print of 82.62 by the close, but about 1¼ points lower on the week, a source said Friday.

The bonds traded at better than 96 bid in May.

Beazer Home’s CDS spreads eased more than 100 bps in the past week ended Wednesday to 821 bps, according to a market source.

The Atlanta-based home construction company’s CDS spreads also widened more than 100 bps in the prior week.

Distressed returns weak

S&P U.S. High Yield Corporate Distressed Bond Index returns remained weak on Thursday but moderated from Wednesday’s slide.

One-day total returns were minus 0.35% on Thursday, compared to minus 1.11% on Wednesday and a positive 0.28% in the week’s first session after the Juneteenth holiday.

Month-to-date total returns remained soft at minus 5.94% on Thursday, up from minus 5.62% on Wednesday and minus 4.56% on Tuesday.

Year-to-date index returns also widened to minus 19.59% from minus 19.31% on Wednesday and minus 18.41% on Tuesday.

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