Carvana notes rally along with stock; Diamond Sports edges lower; Telesat paper higher

By Cristal Cody

Tupelo, Miss., Jan. 30 – Carvana Co.’s paper rallied about 1¼ points to more than 7 points as its stock closed up nearly 30% in strong trading action on Monday.

Carvana’s 10¼% senior notes due 2030 (Caa2/CCC) shot up nearly 7½ points in heavy trading that put it among the most active junk and distressed issues.

Diamond Sports Group LLC’s secured and unsecured notes edged 1/8 point lower in continued strong trading action on Monday as traders gauge a possible Chapter 11 bankruptcy filing.

More than $13 million of the notes were traded over the session.

Carvana and Diamond Sports are among issuers widely expected to account for much of the default volume in 2023, market sources report.

“We think HY defaults are unlikely to exceed 4%, with more than half explained by DSPORT, CVNA, BHCCN and a couple others,” according to a BofA Securities Inc. note on Friday.

Fitch Ratings said in a report on Monday that it expects the broadcasting/media, health care/pharmaceutical, leisure/entertainment and telecommunications sectors to drive 2023 default volume.

“We project the broadcasting/media rate at 10%, as Diamond Sports Group LLC is at risk of defaulting again while Learfield Communications Inc. and Audacy Inc. are other broadly syndicated loan default candidates,” Fitch said.

The number of global defaults picked up last week with four – two from the U.S. market and two from Mexico, according to a S&P Global Ratings note on Monday.

The week kicked off ahead of the Federal Reserve’s rate decision due Wednesday with stocks lower and indices down across the board. The S&P 500 index dropped 1.3%.

The iShares iBoxx High Yield Corporate Bond ETF fell 42 cents, or 0.55%, to $75.74.

The CBOE Volatility index jumped 7.73% by the close to $19.94.

Oil also declined.

West Texas Intermediate crude oil benchmark futures for March deliveries settled down $1.78 at $77.90 a barrel.

In other distressed trading, Telesat Corp.’s 5 5/8% notes due 2026 (B2/CCC+) added 2½ points in active secondary trading.

Carvana paper up

Carvana’s 10¼% senior notes due 2030 (Caa2/CCC) rallied nearly 7½ points to trade at 55½ bid on $13.47 million of trading on Monday, a source said.

The company’s 4 7/8% notes due 2029 (Caa2/CCC) climbed 4 points to head out at 45½ bid on $4 million of trading.

The 5 5/8% notes due 2025 (Caa2/CCC) rose to 45¼ bid after trading 1¼ points higher on $2 million of secondary action on Monday.

Carvana’s stock soared over the session to close up 28.7% at $10 on 108 million shares traded.

The Phoenix-based online car retailer will release fourth-quarter and fiscal 2022 results on Feb. 23.

Diamond Sports active

Diamond Sports’ paper continued to attract distressed secondary interest on Monday with more than $13 million of paper changing hands, a source said.

The 5 3/8% senior secured notes due 2026 (Caa3/CCC-) softened 1/8 point to 6 7/8 bid and a 130% yield on $7.4 million of volume.

The notes were quoted Friday mostly flat at 6½ bid, 7½ offered on $8 million of trading.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/C) also softened 1/8 point to head out Monday at 2 bid on $6.25 million of secondary supply. The yield was 314%.

On Friday, the bonds were quoted at 1½ bid, 2½ offered.

In 2022, parent Sinclair Broadcast Group Inc. deconsolidated the Chesapeake, Va.-based sports broadcast group from its financial statements.

Telesat improves

Telesat Canada LLC’s 5 5/8% senior secured notes due 2026 (B2/CCC+) were quoted better on Monday at 46¼ bid, up 2½ points on $4.85 million of paper traded, a source said.

The notes were moving in the 42 bid range on Thursday.

The Ottawa-based satellite communications company and Loral Space & Communications Inc. completed a merger in 2021.

Distressed index positive

S&P U.S. High Yield Corporate Distressed Bond index one-day returns remained positive on Friday at 0.09%. One-day returns totaled 0.47% on Thursday, minus 0.08% on Wednesday, 0.08% on Tuesday and 0.29% at the start of the prior week.

Month-, quarter- and year-to-date total returns ended Friday at 7.9%, up from 7.81% on Thursday, 7.31% on Wednesday, 7.39% on Tuesday and 7.31% in the first session of the week.

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