AMC notes pressured; Level 3 drops in pre-earnings trading; distressed returns up

By Cristal Cody

Tupelo, Miss., April 30 – AMC Entertainment Holdings, Inc.’s paper came under pressure in heavy volume on Tuesday as trading picked up following the issuer’s release of preliminary first-quarter results on Friday.

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) gave back the ¾ point it added on Monday.

The flight-to-safety bid sent distressed corporate bonds largely lower over the session, along with stocks, while Treasury yields climbed as the Federal Reserve kicked off its two-day monetary policy meeting, sources said.

The benchmark 10-year note yield jumped 7 basis points to 4.69%.

Volatility ramped up with the CBOE Volatility index more than 6% higher at 15.65.

The S&P 500 index declined 1.57%, while the iShares iBoxx High Yield Corporate Bond ETF gave back 56 cents, or 0.73%, to $76.29.

In addition to the Fed’s rate decision due Wednesday, other key market-moving data this week includes the April jobs report on Friday.

No changes to the current Federal Funds interest rate range of 5¼% to 5½% are expected, sources reported.

“Based on interest-rate futures trading, it now appears investors expect the first rate cut – perhaps the only rate cut this year – to come around the end of summer,” according to a Confluence Investment Management note on Tuesday. “As we’ve noted before, continued high interest rates will likely put stress on certain banks, commercial real estate owners, and other players in the financial markets.”

Secondary action ramped up with more than $180 million of distressed paper traded just ahead of the close, up from less than $130 million of volume in the space seen Monday.

Some of the heaviest-traded riskier names yielding over 20% fell around ½ point to over 1 point on more than $70 million of supply.

Distressed bonds from Lumen Technologies, Inc. subsidiary Level 3 Financing, Inc. mostly declined ahead of Lumen’s release of its first-quarter financial results after the market close.

The 3 5/8% senior notes due 2029 (Caa2/CCC-/CCC-) fell ¼ point.

AMC notes slip

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) slipped ¾ point on Tuesday to 68¾ bid in steady trading, a source said.

Volume totaled $6 million by late afternoon. The issue had gained ¾ point on Monday in light trading totaling $4 million.

The Leawood, Kan.-based movie theater company’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) were quoted about 1 point lower this week at 72¼ bid in the most active tranche seen on $20 million of secondary action on Tuesday.

AMC announced in preliminary unaudited first-quarter results on Friday that it expects slightly lower total revenue and improved net losses.

Full-quarter results will be released on May 8.

Level 3 declines

Level 3’s paper mostly declined ¼ point to over 1 point on Tuesday on around $10 million of secondary action with the 3 5/8% senior notes due 2029 (Caa2/CCC-/CCC-) down ¼ point to 34 bid, a market source said.

The Lumen subsidiary’s 4½% senior secured second-lien notes due 2030 (Caa2/B-/CCC) traded around ½ point lower at 58 bid on $7 million of volume.

Overall trading was mostly light ahead of the company’s release of its first-quarter results after the market close.

Lumen reported net income of $57 million in the first quarter, down from $511 million in the same quarter last year.

Revenue declined to $3.29 billion in the quarter, compared to $3.74 billion in the first quarter of 2023.

Lumen completed its transaction support agreement transactions in the first quarter, which included reducing debt maturities outstanding for 2025 to 2026 from approximately $2.1 billion to $600 million and total maturities outstanding for 2027 from around $9.5 billion to $800 million.

The distressed debt exchange affected $6 billion of loans and $7.1 billion of bonds in the largest-out-of-court restructuring since General Motors Co. in 2008, according to a Fitch Ratings note on Tuesday.

The Monroe, La.-based global telecommunications company reiterated its 2024 financial outlook with adjusted EBITDA of $4.1 billion to $4.3 billion guided, along with free cash flow of $100 million to $300 million.

Distressed index advances

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns started the week stronger, climbing on Monday to 0.97%.

Returns were up from 0.44% on Friday and 0.33% in the same session last week.

Month-to-date total returns improved to minus 1.98%, compared to negative 2.92% on Friday and minus 2.94% in the week-ago session.

Year-to-date total returns were positive on Monday at 0.11%, up from negative 0.95% ahead of the weekend and minus 0.87% the same day a week earlier.

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