Rite Aid mixed in thin trading ahead of earnings; Talen continues recovery; Nine Energy up

By Cristal Cody

Tupelo, Miss., April 8 – Distressed secondary action thinned Friday as the weekend loomed with a handful of issuers active.

Rite Aid Corp.’s bonds were mixed in mostly light trading action after sliding about 4 points to 4 5/8 points Thursday following a surprise weak analyst report from Deutsche Bank.

Rite Aid’s stock rebounded over 7% in Friday’s session ahead of the company’s earnings release next week.

Talen Energy Supply LLC’s bonds rose 5/8 point to 3 points in the heaviest trading action in distressed paper during the session, a source said.

The company’s bonds have recovered over 10 points this week, and its CDS spreads retreated from wides seen in March.

In other distressed market activity, Moody’s Investors Service said in a report on Thursday that the trailing 12-month global speculative-grade default rate rose to 2% at the end of February from 1.8% in January.

In Europe, the default rate jumped to 2.1% from 1.2%, Moody’s said.

Moody’s predicts that the global speculative-grade corporate default rate will decline to 1.7% in the second quarter before rising to 2.8% at the end of February 2023, still well below the long-term average of 4.1%.

Market tone remained soft headed into the weekend with stocks mixed and oil prices climbing back toward $100 a barrel.

The iShares iBoxx High Yield Corporate Bond ETF finished down 49 cents at $80.24.

West Texas Intermediate crude oil benchmark futures for May delivery settled $2.23 higher at $98.26 a barrel.

Nine Energy Service, Inc.’s 8¾% notes due 2023 (Caa3/D) picked up 5/8 point over the day as the company moves to offer $250 million of equity securities.

Rite Aid mixed

Rite Aid’s bonds went out mixed in mostly light trading action after sliding about 4 points to 4 5/8 points on Thursday following a surprise weak analyst report from Deutsche Bank, a source said.

Rite Aid’s 7.7% senior debentures due 2027 (Caa2/CCC/CCC) were seen off 1½ points at 70 bid, about 5 points lower from a week ago.

The issue traded 3¾ points to 4¼ points softer Thursday.

Rite Aid’s 8% senior secured notes due 2026 (B3/CCC/BB-) traded less than ¼ point higher Friday at 87 bid, about 6 points softer on the week.

The notes dropped over 4 points on Thursday.

Rite Aid’s 7½% senior secured notes due 2025 (B3/CCC/BB-) improved 1/8 point to the 87 bid area by the close.

The notes were down 4 5/8 points in the prior session and went out Friday over 5 points lower on the week.

Rite Aid’s stock rebounded 7.44% in Friday’s session to close at $7.51 on about 8.57 million shares traded.

The company’s stock was heavily traded Thursday with volume totaling over 20.65 million shares following the Deutsche Bank market report that cut the price target to $1.

Rite Aid’s shares remain well off the 52-week high of $23.02.

Rite Aid will release its fourth-quarter earnings results before the market opens next week in the short session on Thursday and ahead of the Good Friday holiday.

The Camp Hill, Pa.-based drugstore company’s credit default spreads widened 363 bps for the weekly period through Wednesday to 1,716 bps.

Talen bonds gain

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) added another 2 points on Friday to hit 36 bid in the company’s most actively traded issue over the session, a source said.

The notes saw $7 million of volume.

Talen’s 6½% senior notes due 2025 (Caa2/CCC/CCC) picked up 3 points to go out at 36¼ bid on $4 million of paper changing hands.

Talen’s senior notes were trading with handles in the low 20s a week ago on reports of potential restructuring talks.

The Woodlands, Tex. and Allentown, Pa.-based power generation and infrastructure company’s CDS spreads firmed over 7,800 bps for the past week ended Wednesday to 8,103 bps.

Nine Energy improves

Nine Energy's 8¾% notes due 2023 (Caa3/D) rose 5/8 point to 62¼ bid on $4 million of volume Friday, a source said.

The notes have climbed 4 7/8 points since March.

On Tuesday, Nine Energy filed a $250 million shelf with the Securities and Exchange Commission detailing plans to sell common stock, preferred stock and warrants rights.

The Houston-based oilfield services company is scheduled to release its first-quarter earnings results on May 5.

Distressed returns up

The S&P U.S. High Yield Corporate Distressed Bond Index one-day total return was stronger Thursday at minus 0.02% but lower than at the start of week.

One-day returns were minus 0.58% on Wednesday, minus 0.10% on Tuesday and 0.41% on Monday.

Month-to-date total returns weakened to minus 0.29% versus minus 0.27% on Wednesday, 0.31% on Tuesday and 0.41% at the start of the week.

Year-to-date index returns were soft Thursday at minus 5.59%, compared to minus 5.57% on Wednesday, minus 5.02% on Tuesday and minus 4.93% on Monday.

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