Distressed trading light; AMC bonds soft; Transocean gains; China Evergrande improves

By Cristal Cody

Tupelo, Miss., Jan. 5 – While the high-yield space started to see a trickle of bond deals print on Tuesday and Wednesday, secondary action has been thin in the lower-rated and distressed spaces in the first week of 2022.

The front half of the week has seen trading mainly in split-rated and higher-grade junk bonds that are “basically IG,” a source said.

Junk issuers including Kraft Heinz Foods Co., Goodyear Tire & Rubber Co. and Western Digital Corp. have been active and trading well above par this week, sources said.

Distressed secondary action this week has been mostly in issuers including AMC Entertainment Holdings, Inc., Diamond Sports Group LLC, Transocean Inc. and PBF Energy Inc., according to market sources.

AMC Entertainment’s notes softened a second day on Wednesday.

Diamond Sports’ secured and unsecured notes have been mostly flat since Monday.

Overall market tone weakened with the release of the Federal Reserve’s minutes from its December policy meeting and measured volatility nearly 17% higher on the day.

The Nasdaq slid 3.34%.

The iShares iBoxx High Yield Corporate Bond ETF declined a third day and ended the session off 67 cents, or 0.77%, at $86.08.

Bonds in the oil and gas space were flat to over 2 points better as oil prices held stronger a third day.

West Texas Intermediate crude oil benchmark futures for February deliveries settled up 86 cents at $77.85 a barrel.

Paper from Parsippany, N.J.-based petroleum refiner PBF Energy was stable to about ¼ point higher.

Transocean’s notes went out more than 1¼ points to about 2½ points stronger.

In China’s distressed property developer space, China Evergrande Group’s 8¾% senior notes due 2025 (C/C/C) improved ½ point following reports it will meet Jan. 7-10 with certain onshore bondholders.

AMC notes down

AMC’s 10% senior secured second-lien notes due 2026 (Ca/CCC-) traded 1 point weaker on Wednesday at 97½ bid, a market source said.

The notes shed over 1¼ points in the prior session after trading at the week’s start nearly ¾ point better.

The Leawood, Kan.-based movie theater owner’s bonds have been heavily traded on reports the company is considering refinancing debt.

AMC chief executive officer Adam Aron announced on Monday in statements on his Twitter account that the company took on debt at high interest rates in 2020 and 2021 to survive, and if possible, some debt will be refinanced to reduce interest expense, push out debt maturities by several years and loosen covenants.

Diamond Sports steady

Diamond Sports’ secured and unsecured notes remained mostly unchanged in secondary trading on Wednesday, a source said.

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa1/CCC) held steady a second day at 50¾ bid in strong trading activity after moving up ¾ point to 50¾ bid on Monday.

The issue is up about ¾ point since the end of December.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CC) also were mostly unchanged from Monday and Tuesday at the 28½ bid area.

The unsecured notes are up about ¼ point since the end of the year.

The Chesapeake, Va.-based sports broadcast group entered into a multiple-year renewal of its distribution rights agreement with the National Hockey League in December.

Transocean stronger

Transocean’s 11½ senior guaranteed notes due 2027 (Caa3/CCC+) traded over 1 point better at 102 3/8 bid by late afternoon Wednesday, a source said.

The notes had gained 2½ points on Tuesday and were trading under the 98½ bid range as December closed.

The Vernier, Switzerland-based offshore driller’s 8% debentures due 2027 (C/CCC) also rallied about 2½ points on Wednesday to 78½ bid after improving over 1 point in the prior session.

The notes are up about 5 points since the end of 2021.

Evergrande higher

Evergrande’s 8¾% senior notes due 2025 (C/C/C) added ½ point to trade at 14 bid in strong activity on Wednesday, a source said.

The notes rose ½ point on Tuesday in the secondary space after the company reported it received orders to demolish 39 buildings, and its shares resumed trading on the Hong Kong Stock Exchange.

The issue has declined about 70 points since May.

Fitch Ratings and S&P Global Ratings dropped the Shenzhen, China-based real estate developer to default status in December following the end of grace periods on missed coupon payments.

Distressed returns up

Distressed index returns improved in the second session of the new year.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return rose to 0.6% on Tuesday from 0.38% on Monday.

Index returns have improved from minus 1.12% on Friday in the last session of 2021.

Month- and year-to-date index returns totaled 0.99% as of Tuesday.

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