Distressed retail up; Rite Aid gains; Michaels higher; loan defaults outpace junk

By Cristal Cody

Tupelo, Miss., July 21 – Distressed paper saw some gains over Friday’s session with retail paper finding some footing.

Rite Aid Corp.’s 8% senior secured notes due 2026 (Caa3/CCC-/B) extended gains a second day with the notes going into the weekend 4½ points higher on the week.

The issue traded 1¼ points better on the day at 47½ bid, a market source said.

The notes were up about 4½ points on the week.

Michaels Cos, Inc.’s 7 7/8% senior notes due 2029 (Caa2/CCC) improved early in the session and held on to a ¾ point gain by the close, a market source said.

Michaels’ notes went out at 69½ bid.

In other distressed market activity, leveraged loans are expected to outpace the junk space when it comes to defaults this year, according to a BlackRock Investment Management global credit report on Thursday.

The trailing 12-month, issuer-weighted default rate for leveraged loans was 4.03% through the end of June and 2.7% for high-yield bonds.

BlackRock said its year-end 2023 forecast for the trailing 12-month, issuer weighted default rate for high-yield bonds and leveraged loans combined remains at 5% to 6%, up from a combined HY/loan default rate of 3.8% as of June.

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