Michaels’ notes decline; Telesat moves lower; Talen trades up; Diamond Sports mostly flat

By Cristal Cody

Tupelo, Miss., April 6 – Michaels Cos., Inc.’s 7 7/8% senior notes due 2029 dropped 1 1/8 points by the day’s end in the distressed secondary market Wednesday.

Telesat Corp.’s bonds traded stronger early in the session before declining about ¼ point to ½ point.

The two issuers were the among the most active distressed issues seen over the session, a source said.

Talen Energy Supply LLC’s paper climbed ½ point to over 3 points also in strong trading Wednesday.

Markets were mostly soft as stocks fell, oil prices moved below $100 a barrel and investors absorbed the minutes released Wednesday from the Federal Reserve’s March monetary policy meeting.

The iShares iBoxx High Yield Corporate Bond ETF, which dropped $1.07 on Tuesday, fell 64 cents to $80.86.

The Fear Factor index was back above 22 Wednesday with the Chicago Board Options Exchange’s CBOE Volatility Index 4.8% higher at 22.04.

West Texas Intermediate crude oil benchmark futures for May delivery, which climbed $4.01 Monday and declined $1.32 on Tuesday, settled Wednesday $5.73 lower at $96.23.

United Arab Emirates-based Shelf Drilling Holdings Ltd.’s 8¼% senior notes due 2025 (Caa3/CCC+) dropped over 2 points to the 81 bid area on $3 million of secondary action Wednesday, a source said.

Bonds from Russian and Ukraine issuers, including PJSC Lukoil, remain prominent in distressed secondary action in early April, market sources report.

Diamond Sports Group LLC’s paper went out mostly flat on the day after moving lower in early trading.

Michaels trades lower

Michaels’ 7 7/8% senior notes due 2029 (B3/CCC+) went out down 1 1/8 points Wednesday at 84 3/8 bid, a source said.

Secondary supply was strong in the distressed space with $13 million of paper changing hands.

The bonds have drifted lower from the 98 bid range in January.

The Irving, Tex.-based arts and crafts retailer was taken private a year ago by funds managed by Apollo Global Management, Inc. affiliates following a cash tender offer for Michaels’ stock in April 2021.

Telesat notes soften

Telesat’s notes improved in early trading before softening over the afternoon, a market source said.

Telesat Canada LLC’s 6½% senior unsecured notes due 2027 (Caa1/B) rallied as high as 51¼ bid Wednesday before softening about ½ point on the day to 50¾ bid.

The issue was strongly traded with $13 million of volume seen.

Telesat Canada’s 4 7/8% senior secured notes due 2027 (B1/BB-) also were down ¼ point at 72¾ bid in thin trading.

The Ottawa-based satellite communications company in March reported soft fourth-quarter income.

Talen bonds gain

Talen’s paper improved Wednesday in steady trading totaling about $17 million, a market source said.

Talen’s 7¼% senior secured notes due 2027 (B1/B/B) saw the heaviest action with the notes up ½ point at 94¾ bid on $12 million of volume.

Talen’s 6½% senior notes due 2025 (Caa2/CCC/CCC) were 1½ points better on the day at 31½ bid on light supply of $1 million.

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) went out Wednesday over 3 points higher at the 33 bid range on $4 million of secondary action.

Talen’s bonds have been volatile as reports emerged in the prior week the company is in restructuring talks.

The company’s notes jumped about 4 points to 5½ points at the start of the week and went out Tuesday mostly flat to 2¼ points better.

The Woodlands, Tex. and Allentown, Pa.-based power generation and infrastructure company’s credit default swaps spreads have widened over 11,700 basis points since mid-February.

Diamond Sports steadies

Diamond Sports’ 5 3/8% second-lien secured notes due 2026 (Caa3/CCC+) traded over 1 point weaker in early secondary action Wednesday before recovering ground to head out mostly flat at 39 bid, a source said

The notes were quoted up about 1 point on Tuesday after slipping ¾ point Monday.

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

Distressed index down

The S&P U.S. High Yield Corporate Distressed Bond Index one-day total return softened Tuesday to minus 0.10% from 0.41% on Monday and zero on Friday in the first session of the month.

Month-to-date total returns declined to 0.31% on Tuesday from 0.41% on Monday.

Year-to-date index returns fell to minus 5.02% versus minus 4.93% at the start of the week.

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