Rite Aid notes slip as bankruptcy chatter renews; secondary active; CommScope improves

By Cristal Cody

Tupelo, Miss., Oct. 13 – Rite Aid Corp.’s bonds slipped on Friday in heavy secondary action as the market gauges the distressed retailer’s latest announcement and possible bankruptcy plans.

Rite Aid’s 8% senior secured notes due 2026 (Caa3/C/B) slid over ½ point to about 1 point in one of the most active distressed names moving in the secondary market, a source said.

Rite Aid announced in a regulatory filing on Thursday that it is unable to file its earnings report for the quarter ended Sept. 2 but expects to on or before Oct. 17.

The company also said that it anticipates it will report a significant increase in net loss for the quarter and a major increase in outstanding debt.

Rite Aid’s notes had added about 5 points this week until Friday’s session.

“The Street has been active in them,” a source said Friday. “Rite Aid is said to be seeking an asset-backed loan – they need liquidity to continue as a going concern if they’re going into bankruptcy and not liquidation. Bed, Bath & Beyond, that was just a liquidation.”

Weaker-than-expected September inflation data the previous day continued to weigh on markets on Friday with stock indices mixed.

The S&P 500 index finished down 0.5%.

The iShares iBoxx High Yield Corporate Bond ETF dipped 6 cents, or 0.08%, to $72.75.

The CBOE Volatility index shot up 15.76% to 19.32.

Market action in the junk and distressed spaces remained strong over the end-of-week session on Friday, sources reported.

“It was busy,” a trader said. “The market was weaker today.”

CommScope Holding Co., Inc.’s notes also were busy in the secondary space and among the distressed gainers on Friday, a source reported.

Rite Aid declines

Rite Aid’s 8% senior secured notes due 2026 (Caa3/C/B) slid over ½ point to about 1 point on Friday in one of the day’s most active distressed names, a source said.

The notes were quoted at 64¾ bid on $8.5 million of trading but were also seen down about 1 point around 64 bid on $2 million of volume on Friday.

The bonds had added about 5 points in the prior three sessions but were going out on the week about 2 points higher from the same session a week ago.

Rite Aid said in the regulatory filing on Thursday that it expects to report a significant increase in net loss for the quarter ended Sept. 2 and a significant increase in its outstanding debt for the period.

The distressed retailer noted that it has been engaged in reviewing strategic alternatives to recapitalize, refinance or otherwise optimize its capital structure.

The company is said to be seeking a loan to keep operations going.

Rite Aid received notice on Sept. 28 that its stock is no longer in compliance with New York Stock Exchange price listing requirements.

The Camp Hill, Pa.-based drugstore chain’s shares (NYSE: RAD) slid 16.81% to close Friday at 65 cents.

CommScope better

CommScope, Inc.’s 5% senior notes due 2027 (Caa1/CCC+) traded 2 points better in the afternoon at 54½ bid, a source said.

Volume in the issue was strong in the distressed space with $5.3 million of notes traded.

CommScope’s 7 1/8% senior notes due 2028 (Caa1/CCC+) were quoted going out at 56 bid on $4.4 million of trading on Friday.

The Hickory, N.C.-based network infrastructure manufacturer’s issue softened over 2 points this week.

Distressed returns down

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns softened on Thursday to minus 0.4% from 0.15% on Wednesday and 1.39% on Tuesday.

Month-to-date total returns fell to minus 1.39% versus minus 0.99% on Wednesday and minus 1.14% at the start of the short holiday week.

Year-to-date distressed total returns declined to 16.14% from 16.61% midweek and 16.43% on Tuesday.

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