Bed Bath & Beyond notes trade mostly lower; Embarq declines; Global Aircraft higher

By Cristal Cody

Tupelo, Miss., Oct. 19 – Bed Bath & Beyond Inc.’s senior notes traded flat to weaker on Wednesday in the first session after the distressed retailer announced exchange offers for the bonds.

The retailer’s 3.749% senior notes due 2024 (C/CC) slipped 3 points over the day.

Defaults in 2023 are expected to be concentrated in sectors including retail with Bed, Bath & Beyond and Carvana Co. expected to lift the retail default rate as high as 11%, according to Fitch Ratings.

Fitch said in a report on Tuesday that it anticipates 2023 will produce approximately 30 defaults, up from the 13 defaults year to date and 11 recorded in 2021, but down from 55 averaged during the 2017-2020 period.

The U.S. high-yield default rate is forecast to finish 2023 at 2½% to 3½%, below the 3.8% 21-year historic average and 2020’s 5.2% rate, Fitch said.

The year-to-date high-yield default rate stands at 1.2% and is expected to close 2022 at 1½% to 1¾%.

Market tone soured on Wednesday with stocks moving lower.

The iShares iBoxx High Yield Corporate Bond ETF fell 68 cents, or 0.93%, to $72.22.

Volatility was marginally higher with the CBOE Volatility index up 0.85% at 30.76.

Embarq Corp.’s 7.995% notes due 2036 (Caa2/CCC/CCC) traded heavily over the last two sessions and went out Wednesday down 2 points and were 4 7/8 points lower since Friday.

Global Aircraft Leasing Co., Ltd.’s 7¼% senior notes due 2024 (B1) rose ¼ point and were trading 1½ points better on the week in the distressed market following a downgrade from Moody’s Investors Service.

Bed Bath & Beyond declines

Bed Bath & Beyond’s notes traded mostly weaker on Wednesday following the exchange offer announcement the prior day, a source reported.

The 3.749% senior notes due 2024 (C/CC) slipped 3 points to 28 bid by the day’s close.

Bed Bath & Beyond’s 4.915% senior notes due 2034 (C/CC) dropped 1 point to 13 bid.

The 5.165% senior notes due 2044 (C/CC) went out mostly flat at the 14 bid area.

The retailer on Tuesday announced offers to exchange the senior notes for new second-lien and third-lien debt.

The exchange offers will provide a significant discount to the par value of the existing notes, S&P said when downgrading the paper on Tuesday.

In September, the retailer reported steep second-quarter losses.

The Union, N.J.-based home products retailer is underway in a search for a new chief executive and strategic changes that include closing stores.

Embarq trades down

Embarq’s 7.995% notes due 2036 (Caa2/CCC/CCC) fell 2 points to 37½ bid in fairly active secondary trading on Wednesday, a source said.

The notes gave back 2¼ points on Tuesday and were trading 4 7/8 points lower since Friday.

Connect Holding II LLC, doing business as Brightspeed, recently closed on its acquisition of the Overland Park, Kan.-based telecommunications company from Lumen Technologies, Inc.

Global Aircraft up

Global Aircraft’s 7¼% senior notes due 2024 (B2) rose ¼ point to 80¼ bid in light trading on Wednesday after climbing ¾ point the previous day, a source said.

The notes were trading 1½ points better so far this week.

Moody’s said Tuesday it downgraded the senior notes to B2 from B1 and noted the company’s outlook remained negative.

Global Aircraft is a commercial aircraft leasing company and indirect subsidiary of China-based Bohai Leasing Co., Ltd. and majority owner of outstanding ordinary shares of aircraft leasing company Avolon Holding Ltd.

Distressed returns positive

S&P U.S. High Yield Corporate Distressed Bond index one-day returns remained positive on Tuesday at 0.43% but down from 0.58% on Monday.

Month-to-date total returns were up at 0.36% from minus 0.07% at the week’s start.

Year-to-date total returns improved to minus 25.95% on Tuesday from minus 26.26% on Monday.

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