Revlon lower after Chapter 11 filing; Talen down; defaults eyed; Cooper-Standard flat

By Cristal Cody

Tupelo, Miss., June 16 – Revlon Inc.’s bonds finished slightly lower after experiencing most of their losses in the past week ahead of the company’s Chapter 11 bankruptcy filing announced Thursday.

Revlon’s 6¼% senior notes due 2024 (C/D) were down about ¾ point on the day.

The bonds had largely sold off last week in anticipation of an expected filing from the cosmetics manufacturer.

“It dropped like a rock,” a source said. “Revlon is pretty active.”

Nearly $13 million of the company’s bonds changed hands during the session, the source said.

Bankrupt paper was among the active distressed issues seen Thursday, according to market sources.

Bankrupt energy producer Talen Energy Corp.’s 10½% senior notes due 2026 (/D/C) were down 1 point in “relatively active” trading during the session, a source said.

Stocks tanked Thursday after initially moving higher following the Federal Reserve’s 75 basis point rate hike the previous day.

The S&P 500 index declined 3.25% and the Nasdaq dropped 4.08%.

The iShares iBoxx High Yield Corporate Bond ETF was down 1.59% at $73.82.

“The market was pretty crappy today,” a source said. “There was a lot of second-guessing post-yesterday, and we do have a three-day weekend coming up, so people are trying to square up.”

Market volatility climbed more than 11% after declining 10% the prior day.

The Chicago Board Options Exchange’s CBOE Volatility index was up 11.24% at 32.95 at the close.

The junk space mostly held in Thursday, failing to follow the downward spike in equities, a source noted.

Meanwhile, the pace of defaults is expected to increase this year, according to S&P Global Ratings.

The global corporate default tally rose by one this past week after a confidential default was added to the tally, S&P said in a news release on Wednesday.

Year to date, there have been 32 global defaults with four in May, S&P said.

U.S. defaults are 40% lower than the previous year, with only 15 defaults so far in 2022, compared with 25 in 2021 and 66 in 2020, according to the report.

“However, the U.S. distress ratio nearly doubled over the last month to 4.3% from 2.4%,” S&P said. “Although the distress ratio is low compared with historical averages, the month-over-month change is the highest since March 2020, indicating we could begin to see defaults rise in the region.”

In other secondary activity, Cooper-Standard Automotive Inc.’s 5 5/8% senior notes due 2026 (Caa2/CCC-) were unchanged at 48½, 49, a source said.

The bonds are about 1 point better on the week following Cooper-Standard Holdings Inc.’s announcement Tuesday that it retained Goldman Sachs & Co. LLC as a financial adviser to assist in evaluating potential alternatives for refinancing its capital structure.

Shares in the Northville, Mich.-based supplier of sealing and fluid handling systems and components closed up 8.63% at $4.03.

Revlon moves down

Revlon Consumer Products Corp.’s 6¼% senior notes due 2024 (C/D) went out Thursday at 4¾ bid, down about ¾ point on the day, according to market sources.

“A week ago, they were trading around 25,” a source said. “It’s been trading in the last couple of days in this 4, 5, 6, 7 area.”

The bonds closed out the prior week down about 15 points.

Revlon reported in an 8-K filing with the Securities and Exchange Commission on Thursday that it filed for Chapter 11 on Wednesday in the U.S. Bankruptcy Court for the Southern District of New York.

Moody’s and S&P downgraded the issuer on Thursday.

The New York-based cosmetics manufacturer’s stock closed down over 13% at $1.95.

Talen lower

Talen Energy Supply LLC’s 10½% senior notes due 2026 (/D/C) fell 1 point to 63, 64 by the day’s end, a source said.

The bonds are trading about 3 points softer this week.

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

Distressed index higher

The S&P U.S. High Yield Corporate Distressed Bond index saw gains following the Fed’s rate hike on Wednesday.

One-day total returns improved to 0.69% from minus 0.51% on Tuesday and minus 2.37% on Monday.

Month-to-date total returns rose to minus 3.54% from minus 4.2% on Tuesday and minus 3.71% at the week’s start.

Year-to-date index return losses also narrowed to minus 17.54% versus minus 18.11% on Tuesday and minus 17.69% on Monday.

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