Party City lower on bankruptcy news after trading lull; Bed Bath & Beyond declines

By Cristal Cody

Tupelo, Miss., Jan. 18 – Party City Holdings Inc.’s paper saw secondary action Wednesday on the heels of the company’s Chapter 11 bankruptcy filing after a week-long trading lull.

Party City’s 10.13% notes due 2025 (Caa3/CCC) and its 8¾% senior secured notes due 2026 (Caa3/CCC) attracted just over $7 million of volume on Wednesday, a source reported.

“Nothing has traded since the 9th on Party City,” the source said. “Everybody has been waiting.”

The company’s $750 million of 8¾% notes traded earlier in January ahead of the bankruptcy announcement in the low 20s and were down in the high teens by Wednesday, market sources said.

The bonds were off more than 10 points from a month ago.

Bed Bath & Beyond Inc. also has been on default watchlists with a potential bankruptcy being eyed and trading in the company’s paper “very volatile,” a source said.

The company’s notes were quoted moving steadily lower over the past four sessions.

Looking at gainers, one distressed company stood out in the secondary market on Wednesday.

Canadian iron ore mining company Tacora Resources Inc. “traded up today,” a source said.

Tacora’s 8¼% senior secured notes due 2026 (Caa3/CCC-) shot up 8 points to head out at 73¼ bid, the source said.

The issue, totaling $225 million outstanding, saw $5 million of secondary volume.

Markets were mostly under pressure on Wednesday with stock indices down as much as 1.81% on the Dow Jones industrial average.

The iShares iBoxx High Yield Corporate Bond ETF rose 9 cents, or 0.12%, to $76.47.

The CBOE Volatility index was up 5% at 20.34.

In other distressed market action, following six defaults in December, the global default tally for 2022 ended up 15% above 2021 levels, according to a S&P Global Ratings report on Wednesday.

The U.S. market led both the December and full-year default tallies with four and 36 defaults, respectively, S&P said.

Europe saw 17 defaults, a total that clocked in 20% higher than 2021 levels.

Consumer products and home builder and real estate sectors accounted for more than 1/3 of all defaults in 2022, while distressed exchanges were the leading reason for nearly half of all defaults, S&P said.

Party City bonds down

Party City’s $750 million of 8¾% senior secured notes due 2026 (Caa3/CCC) were trading ahead of the bankruptcy announcement with a low 20 bid handle, down more than 10 points from a month ago, sources said.

The bonds have been lightly traded in January and were last seen in the secondary market on Jan. 9 until Wednesday, the day after the company filed for Chapter 11, one source said.

On Wednesday, Party City’s 8¾% notes were quoted at 19¼ bid on $3.19 million of volume.

Party City started gracing default watchlists in late 2022.

The bonds sank in November after parent Party City Holdco Inc. reported weak third-quarter results.

The issue slid further into distressed trading with the bonds dropping to 30½ bid on Dec. 8, Prospect News reported.

Party City Holdco and some of its subsidiaries filed for Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the Southern District of Texas.

Party City’s franchise stores, subsidiaries outside of the United States and its foil balloons business, Anagram, are not included in the filing.

The Woodcliff, N.J.-based party goods retailer anticipates emerging from bankruptcy in the second quarter.

Bed Bath & Beyond lower

Bed Bath & Beyond’s paper remained soft on Wednesday, but overall secondary supply has been thin with trading in “small pieces” as the notes posted steady declines over the past week, a market source said.

The distressed retailer’s 3.749% senior notes due 2024 (C/D) were quoted with an 11 handle on Thursday, a 9½ bid handle on Friday, a 9 handle on Tuesday and down to a 7 handle on Wednesday.

The issue traded in the low 30s in December.

Bankruptcy chatter has been circling the company since Bed Bath & Beyond reported Jan. 5 substantial doubt about its ability to continue.

In late 2022, Bed Bath & Beyond had launched offers to exchange its senior notes for new second- and third-lien debt, extending the offers from Dec. 5 to Dec. 19 and then again to Jan. 4. The Union, N.J.-based home products retailer reported Jan. 5 the offers were terminated after conditions were not met.

Distressed returns at 7%+

The S&P U.S. High Yield Corporate Distressed Bond index is up so far in 2023.

One-day returns were 0.28% on Tuesday in the first session of the holiday-shortened week.

Month-, quarter- and year-to-date total returns were 7.18% as of Tuesday.

One-year returns remained negative at minus 21.48%.

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