Bed Bath & Beyond notes lower in heavy trading; Party City flat; Diamond Sports active

By Cristal Cody

Tupelo, Miss., Jan. 27 – Bed Bath & Beyond Inc.’s notes edged down with the issuer the most active distressed name in the secondary market on Friday after the company reported that its loans were called due to default.

The distressed retailer’s notes dropped about ¾ point on more than $22 million of paper changing hands by the day’s close.

“This could be the end for them,” a source said.

All three tranches of the company’s $1.03 billion of outstanding paper were trading in the single digits, sources said.

Bed Bath & Beyond reported in a regulatory filing on Thursday that its senior secured credit facilities were called by JPMorgan Chase Bank, NA after failing to make a payment on Jan. 13.

“Most people are trading them flat,” a source said, noting doubt about the company's ability also to pay interest payments due Wednesday on its bonds.

“All of them have Feb. 1 payments due,” the source said.

Bankrupt Party City Holdings Inc.’s 8¾% senior secured notes due 2026 (D/C) were mostly flat in thin trading on Friday after dropping 7½ points the previous session.

Diamond Sports Group LLC also was among the most active distressed names traded on Friday on about $8 million of volume as the company looks to be the next “tap for an 11 filing,” a source said.

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa3/CCC-) went out mostly unchanged.

Distress in the financial markets has stayed high in January with inflation at the forefront.

“Downgrades were more than twice the number of upgrades in December, and speculative-grade downgrades exceeded investment grade over 10 to 1,” according to a S&P Global Ratings report on Friday. “The number of B- and lower rated borrowers is now more than 50% higher than five years ago.”

Market tone was mostly better on the day with stock indices all closing higher and volatility continuing to drop.

The iShares iBoxx High Yield Corporate Bond ETF fell 23 cents, or 0.3%, to $76.16.

The CBOE Volatility index was off 1.17% at $18.51 by the close.

West Texas Intermediate crude oil benchmark futures for March deliveries moved $1.33 lower and below $80 a barrel to $79.68.

Bed Bath & Beyond down

Bonds (C/D) from distressed retailer Bed Bath & Beyond were moving lower in strong trading action on Friday, according to market sources.

All three tranches of notes were trading “around 6,7,” a source said of the 3.749% senior notes due 2024, 4.195% senior notes due 2034 and 5.165% senior notes due 2044.

Bed Bath & Beyond’s 5.165% notes had the heaviest interest with almost $23 million traded at a quote of 5¾ bid, a source said.

The 2024 tranche saw about $2.5 million of secondary action on Friday, while the 2034 notes had about $4.5 million of bonds traded over the session.

Bed Bath & Beyond’s stock closed the day up 1.19% at $2.55, well off the 52-week high of $30.06.

S&P dropped the notes to a D rating from C during the session.

Bed Bath & Beyond said in the regulatory filing Thursday that it does not have the resources to repay the credit facilities called due to default by JPMorgan and is now considering all strategic alternatives, including a restructuring.

Bed Bath & Beyond was on default watchlists as 2023 opened.

The Union, N.J.-based home products retailer reported Jan. 5 that it terminated exchange offers launched in late 2022 for the notes after conditions were not met.

Party City thinly traded

Party City’s 8¾% senior secured notes due 2026 (D/C) went out mostly flat in “very light activity” at 10½ bid, 11½ offered, a source said.

Trading was thin on less than $2 million of secondary supply.

The Woodcliff, N.J.-based party goods retailer’s bonds dropped 7½ points to 10½ bid on Thursday on nearly $11.5 million of volume.

Parent Party City Holdco Inc. and some of its subsidiaries filed for Chapter 11 bankruptcy on Jan. 17 in the U.S. Bankruptcy Court for the Southern District of Texas.

Diamond Sports flat

Diamond Sports’ paper saw strong trading action on Friday but finished mostly unchanged, a source said.

The 5 3/8% senior secured notes due 2026 (Caa3/CCC-) were quoted at 6½ bid, 7½ offered on $8 million of secondary volume.

The issue closed out the prior week at 7½ bid on $10 million of volume.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/C) were quoted trading at 1½ bid, 2½ offered on Friday.

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

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index one-day returns finished Thursday higher at 0.47%, up from minus 0.08% on Wednesday, 0.08% on Tuesday and 0.29% on Monday.

Month-, quarter- and year-to-date total returns climbed to 7.81% on Thursday from 7.31% on Wednesday, 7.39% on Tuesday and 7.31% at the start of the week.

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