Michaels, Ahern mixed off fresh downgrades; Bed Bath active; CHS paper up; Transocean drops

By Cristal Cody

Tupelo, Miss., July 12 – Bonds in the retail and health care spaces remained under pressure on Tuesday.

Michaels Cos., Inc.’s 7 7/8% senior notes due 2029 (Caa1/CCC+) softened following a negative outlook from S&P Global Ratings on Tuesday and a downgrade from Moody’s Investors Service the prior day.

Downgrades in the space are growing with S&P Global Ratings reporting Monday that it lowered the credit ratings on arts and crafts and sewing retailer JoAnn Inc.

Distressed retailer Bed Bath & Beyond Inc.’s notes were mixed in strong secondary activity on Tuesday with the short-dated notes about 1 point higher and the long bonds about 1¼ points lower.

Meanwhile, Ahern Rentals, Inc.’s 7 3/8% second-priority senior secured notes due 2023 (Caa3/C) ticked up 1¼ points off a fresh downgrade in the prior session.

Looking at the distressed health care space, Community Health Systems Inc.’s notes were trading about ¼ point higher.

Market tone remained soft with stock indices down a second day and oil prices weaker.

The iShares iBoxx High Yield Corporate Bond ETF was up 0.42%, or 31 cents, by the day’s close at $74.78.

West Texas Intermediate crude oil benchmark futures for November deliveries slid $8.25 on Tuesday, settling at $95.84 a barrel.

Transocean Inc.’s 8% debentures due 2027 (C/CCC-) gave back 4 points by the end of the session.

Michaels lower

Michaels’ 7 7/8% senior notes due 2029 (Caa1/CCC+) fell ¼ point to 68 bid in light trading on Tuesday, a source said.

The bonds are up about ½ point since Friday.

S&P, on Tuesday, revised the company’s outlook to negative from stable.

Moody’s, on Monday, downgraded the issuer, its senior secured notes and unsecured paper, citing elevated ocean freight costs and slowing consumer demand.

The Irving, Tex.-based arts and crafts retailer was taken private by funds managed by Apollo Global Management, Inc. affiliates in 2021.

Bed Bath & Beyond mixed

Bed Bath & Beyond’s 3.749% senior notes due 2024 (B3/B+) improved about 1 point to 40¼ bid in heavy trading action by late afternoon, a source said.

The company’s paper was mixed with the 5.165% senior notes due 2044 (B3/B+) down 1¼ points to 21 bid in heavy trading over the session.

The Union, N.J.-based home products retailer’s paper sank about 20 points to over 30 points in June following the company’s weak first-quarter earnings report and shake-up of senior management.

Ahern notes up

Meanwhile, Ahern Rentals’ 7 3/8% second-priority senior secured notes due 2023 (Caa3/C) climbed 1¼ points to 77¼ bid over the day, a market source said.

Ahern Rentals’ early tender offer to exchange $550 million of the second-lien notes expires at 5 p.m. ET Thursday.

Participating noteholders will receive new 8 3/8% second-priority senior secured notes due 2026 that will be guaranteed by affiliate Xtreme Re-Rental LLC.

The 7 3/8% notes have declined from trading at the 90s bid range in May.

Both Moody’s and S&P said they consider the offer a distressed exchange.

Moody’s downgraded the company and the bond ratings on Monday.

The exchange offer expires July 28.

The Las Vegas-based equipment rental company announced in September 2021 that it would not refinance the issue due to market conditions.

CHS improves

Elsewhere, CHS/Community Health Systems, Inc.’s 6 1/8% senior secured notes due 2030 (Caa2/CCC) rose ¼ point to 57¼ bid in light trading on Tuesday, a source said.

The issue was trading about ¾ point better since Friday.

Bonds from the Franklin, Tenn.-based operator of acute care and outpatient facilities were mostly higher during the session with the company’s 6 7/8% senior notes due 2029 (Caa2/CCC) also up about ¼ point to 60¼ bid.

Transocean declines

In other distressed paper traded Tuesday, Transocean’s 8% debentures due 2027 (C/CCC-) fell 4 points by the day’s end, a market source said.

The notes went out at 58 bid.

The Vernier, Switzerland-based offshore driller’s notes have declined more than 7 points so far this week.

Distressed index slips

The S&P U.S. High Yield Corporate Distressed Bond Index softened at the start of the week.

One-day total returns on Monday were minus 0.08%, down from 0.21% on Friday.

Month-to-date total returns fell to minus 0.6% from minus 0.52% ahead of the weekend.

Year-to-date total returns widened to minus 23.09% on Monday from minus 23.03% on Friday.

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