Junk liquidity thins; Rite Aid notes move on bankruptcy news; funds lose $1.17 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 25 – The dollar-denominated junk primary market ended a dormant week on Friday and will likely remain dormant in the week ahead, sources said.

The market is expected to see a meaningful reactivation in September, according to a debt capital markets banker who looks for $8 billion to $10 billion of issuance in the month ahead.

A trader said that given a supportive backdrop – stability in equities and risk-free rates, in particular – a single full week in September could generate $10 billion of issuance.

September will be a somewhat truncated month, the trader added, noting that the extended Labor Day holiday weekend gets underway following the Friday, Sept. 1, close and that market activity will not resume until Tuesday, Sept. 5.

Meanwhile, it was a sleepy day in the secondary space on Friday.

Rite Aid Corp.’s senior notes diverged following news the struggling retailer was preparing a bankruptcy filing with its 8% senior secured notes due 2026 (Caa3/CCC-/B) making large gains while its 7.7% senior notes due 2027 (Ca/CCC-) plunged.

Victoria's Secret & Co.’s 4 5/8% senior notes due 2029 (B1/BB-) were down in active trade with expectations for the retailer’s upcoming earnings report low.

The combined high-yield funds sustained $1.17 billion of net outflows in the week to the Wednesday close, according to fund-tracker Refinitiv Lipper.

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