Talen Energy mixed, CDS spreads come in; Rite Aid mostly soft; Diamond Sports steadies

By Cristal Cody

Tupelo, Miss., April 21 – Bonds were mixed in the distressed space on Thursday as the VIX climbed over 10% and stock indices dropped over 1%.

The iShares iBoxx High Yield Corporate Bond ETF slid 55 cents to $79.74.

The Chicago Board Options Exchange’s CBOE Volatility index jumped over 11% to 22.68 by late afternoon.

Talen Energy Supply LLC’s senior notes were mixed over the session but trading about 3 1/8 points to over 5 points higher on the week.

Talen’s credit default swap spreads also came in over 3,000 basis points this week after widening heavily in March as reports emerged the company is in restructuring talks.

Rite Aid Corp.’s notes are trading mostly softer since the company reported heavy fourth-quarter losses a week ago.

The drug retailer’s CDS spreads also widened over the week.

Diamond Sports Group LLC’s secured and unsecured notes went out mostly unchanged in light secondary supply but trading stronger on the week.

In other distressed market action, S&P Global Ratings reported that the 2022 global corporate default tally increased to 25 this week after nine issuers defaulted.

Of the nine, three each were in the United States, the emerging markets and Europe and included U.K-based media and entertainment company Owl Finance Ltd., S&P said in a release on Wednesday.

“Despite the sharp weekly rise, the global tally is still marginally below the 2021 year-to-date total of 27,” S&P said.

Talen Energy mixed

Talen’s paper is trading mostly stronger on the week, while its CDS spreads also improved substantially, market sources said.

Talen’s 10½% senior notes due 2026 (C/CC/CCC) softened to 36¼ bid, down 1¾ points on the day but up about 3 1/8 points this week.

The company’s 6½% senior notes due 2025 (C/CC/CCC) were over 1 point better near the 38¼ bid range in light trading.

The notes have recovered about 5 3/8 points this week.

The paper had sunk to the low 20s in March following reports Talen is in restructuring talks.

Talen’s CDS spreads also came in 3,005 bps for the past week ended Wednesday to 5,340 bps.

The Woodlands, Tex., and Allentown, Pa.-based power generation and infrastructure company’s CDS spreads had widened to as high as 15,906 bps in the March 30 period.

Moody’s Investors Service and S&P downgraded the issuer last week.

Rite Aid mixed

Rite Aid’s bonds have remained mostly soft since the issuer reported weak fourth-quarter earnings ahead of the Good Friday holiday, and its CDS spreads also widened this week, sources reported.

Rite Aid’s 7½% senior secured notes due 2025 (B3/CCC/BB-) traded up ¼ point on Thursday to 88½ bid. The issue has declined about 2½ points since last week.

The company’s 8% senior secured notes due 2026 (B3/CCC/BB-) dipped about ½ point to the 87½ bid range on Thursday, over 3 points lower this week.

Rite Aid’s 7.7% senior debentures due 2027 (Caa2/CCC/CCC) also traded about 1¾ points lower on the day at a print of 71.438.

The company’s CDS spreads softened over the past week ended Wednesday, also, widening 182 bps to 1,852 bps.

The Camp Hill, Pa.-based drugstore company reported a week ago it sustained a fourth-quarter loss of $7.18 per share versus a loss of 34 cents a share a year ago.

Diamond Sports steady

Diamond Sports’ secured and unsecured notes were mostly unchanged in light secondary action on Thursday but trading higher so far this week, a source said.

The company’s 5 3/8% second-lien secured notes due 2026 (Caa3/CCC+) headed out mostly flat at 37¾ bid and up about ¾ point from last week.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CC) were unchanged from Wednesday at 22½ bid but trading about 2¼ points higher since last week.

The Chesapeake, Va.-based sports broadcast group closed on a distressed debt exchange in March that included exchanging 5 3/8% senior secured notes due 2026 for the 5 3/8% second-lien notes.

Distressed returns up

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return was 0.16% on Wednesday, compared to zero on Tuesday and 0.44% on Monday.

Month-to-date total returns improved to minus 1.21% from minus 1.37% on Tuesday and at the start of the week.

Year-to-date index returns were higher on Wednesday at minus 6.46% versus minus 6.61% in the prior two sessions.

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