Spirit Airlines paper bounces higher; DISH little changed; Diamond Sports draws interest

By Cristal Cody

Tupelo, Miss., Jan. 19 – Some distressed paper got a lift on Friday and bounced off midweek lows in a turnaround from events at the short week’s start.

Spirit Airlines Inc.’s 8% senior secured notes due 2025 moved off its Thursday low on more than $90 million of bonds traded on Friday after the company released an investor update during the session.

“The biggest mover on the upside was Spirit,” a trader said. “They’re definitely moving around.”

The notes shot up more than 10 points on Friday to a handle in the low 60s and were ending the week improved but about 14 points lower. The issue had declined more than 20 points by Thursday after a federal judge blocked the company’s $3.8 billion merger with JetBlue Airways Corp. on Tuesday.

Spirt Airlines’ notes had reached a low this week in the high 40s before recovering some losses after Friday’s update that came as bankruptcy chatter emerged in the wake of the collapse of the JetBlue takeover.

“There’s sort of wishful thinking they’re going to avoid,” a market source reported.

DISH Network Corp.’s notes also some recovery on Friday after its debt exchange offers announced on Tuesday and following ratings downgrades caused heavy volatility in the paper.

DISH DBS Corp.’s 7¾% senior notes due 2026 were “down a point pre-announcement,” a source said.

The bonds traded on Friday but there was “not a lot” of change in the prices from before the exchange offers, the source said.

Junk bonds overall were lifted higher along with stocks.

The iShares iBoxx High Yield Corporate Bond ETF added 13 cents, or 0.17%, to $77.17.

The CBOE Volatility index declined nearly 6% on the day.

“The stock market was up, so it was a pretty good tone,” a source said.

Diamond Sports Group, LLC’s 5 3/8% senior secured notes due 2026 also were bucking over 4 points higher on the week after the bankrupt sports broadcaster announced a restructuring support agreement with its parent company and creditors and attracted an intriguing minority investment from Amazon.com.

“It was surprising,” a trader said. “People expected them to liquidate and not reorganize. Seeing Amazon hop in there, other people have some interest.”

The distressed bonds neared double digits on Friday after a fairly active session where more than $20 million of paper changed hands.

Spirit bonds see upside

Spirit Airlines’ 8% senior secured notes due 2025 went out Friday at 60 bid, 61 offered, a trader said.

The bonds started the week at 74½ bid, 75½ offered and sank to 51 bid, 52 offered and then further to a low of 47½ bid, 48½ offered following Tuesday’s court ruling against the merger with JetBlue before the paper bounced back on Friday.

Spirit Airlines said in the investor update on Friday that the merger agreement between Spirit, JetBlue and JetBlue subsidiary Sundown Acquisition Corp. that was dated July 28, 2022 “remains in full force and effect.”

On Tuesday, the U.S. District Court of the District of Massachusetts on Tuesday granted the U.S. Department of Justice’s request for a permanent injunction against the proposed merger of Spirit and JetBlue.

“Spirit has stated that it disagrees with the U.S. District Court’s ruling and continues to believe that a combination with JetBlue is the best opportunity to increase much needed competition and choice by bringing low fares and great service,” according to Friday’s statement.

Both JetBlue and Spirit said they are reviewing the court’s decision and evaluating next steps.

Spirit Airlines also said Friday in the investor update that it is “assessing options to refinance its 2025 debt maturities,” including the $1.1 billion of 8% notes.

As of Dec. 31, the company said it had $1.3 billion of liquidity, including unrestricted cash, short-term investments and $300 million of liquidity under its revolving credit facility.

The Miramar, Fla.-based low-cost airline said Friday that its interim fourth-quarter revenue is expected to total at the high end of its initial guidance due to strong holiday travel and better-than-expected operating expenses due primarily to lower fuel costs.

Spirt Airlines plans to hold a conference call to discuss fourth-quarter results and its outlook on Feb. 8.

The company’s stock (NYSE: SAVE) rallied back 17.19% on Friday to close at $6.68.

DISH mixed on week

DISH’s bonds saw some mending on Friday despite the sour tone set by its exchange offers and subsequent ratings downgrades this week, according to market sources.

On Tuesday, parent EchoStar Corp. announced that DISH DBS Issuer LLC had started exchange offers and consent solicitations to exchange its 5 7/8% senior notes due 2024, 7¾% senior notes due 2026, 7 3/8% senior notes due 2028 and 5 1/8 senior notes due 2029 for up to $3 billion of new secured notes.

“It seems like they’re just mobilizing – it looks very convincing,” a source said.

DISH’s 5 7/8% senior notes due 2024 were going out Friday at 91 bid, 92 offered, about 1 point higher on the week.

The notes traded a week ago before ethe exchange announcement at 90 bid, 91 offered.

DISH DBS’ 7¾% senior notes due 2026 were “down a point pre-announcement,” a source said.

The bonds traded Friday at 56 bid, 57 offered versus 57 bid, 58 offered in the same session a week earlier.

“They tried to rally a bit on Tuesday, but that didn’t work and they bottomed out on Wednesday at 53, 54,” the source said.

DISH’s 7 3/8% senior notes due 2028 also saw a little sizzle on Friday with the notes trading at 42 bid, 43 offered by the close, up from bottoming out at 40 bid, 41 offered on Wednesday.

The issue, though, was flat from a week ago.

“They definitely have been active, but there’s not a lot of price movement on the week,” the source noted.

The Englewood, Colo.-based satellite cable company’s exchange offers expire Feb. 12.

Diamond Sports attracts bids

Diamond Sports’ 5 3/8% senior secured notes due 2026 went out Friday at 8 bid, 9 offered in the secondary market, a trader said.

Before Wednesday’s announcement that Diamond Sports entered into a restructuring support agreement with the majority of its debt holders, the notes traded at 3½ bid, 4½ offered.

The issue started to rally back from near zero in late December on reports that Amazon.com was considering a deal with the company to offer their sports coverage.

The Chesapeake, Va.-based sports broadcast company said the restructuring agreement includes a commitment from Amazon for a minority investment in Diamond Sports and to enter into a commercial arrangement to provide access to Diamond Sports’ services via Prime Video.

Diamond Sports filed for Chapter 11 bankruptcy back on March 14, 2023 and in July also filed a complaint against parent Sinclair Inc. and others over transactions taken against its interests since it was acquired from Walt Disney Co. in August 2019.

Diamond also announced on Wednesday that it has an agreement in principle with Sinclair to settle the pending litigation in a structure that includes receiving $495 million in cash from the parent company.

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns turned positive on Thursday and reached 0.46%, improved from minus 0.86% on Wednesday and minus 0.59% on Tuesday.

Month-, quarter- and year-to-date total returns rose to minus 3.18% from minus 3.62% on Wednesday and negative 2.79% on Tuesday.

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