Exela notes higher as stock plunges; Transocean paper rallies; Party City notes lower

By Cristal Cody

Tupelo, Miss., July 26 – Short-dated paper carrying 11½% coupons from Exela Technologies, Inc. and Transocean Inc. saw strong distressed secondary market action on Tuesday.

The issuers stood out amongst the most active junk names traded over the session, sources said.

Exela’s 11½% first priority senior secured notes due 2026 (Caa3/CCC-) traded more than 1 point better, while its shares plunged more than 35% after the company effected a reverse stock swap the previous day.

Transocean’s notes traded about ½ point to 3 points better on Tuesday, including its 11½% senior guaranteed notes due 2027 (Caa3/CCC) that were up about ½ point.

Financial markets soured with stock indices down across the board ahead of the Federal Reserve’s rate decision due Wednesday.

Measured market volatility was higher with the CBOE Volatility index up 5.69% at 24.69.

The iShares iBoxx High Yield Corporate Bond ETF fell 54 cents, or 0.7%, to $76.33.

Oil prices also were weaker.

West Texas Intermediate crude oil for September delivery settled $1.72 lower at $94.98 a barrel.

Party City Holdings Inc.’s 8¾% senior secured notes due 2026 (B3/B-) dropped another 2 points in steady trading on Tuesday.

In other market activity, the number of companies rated CCC+ or below in U.S. and Canada markets slipped to 131 in June from 135 in May, S&P Global Ratings said in a report on Tuesday.

The media and entertainment sector led the positive rating movement out of the CCC rating category, with three upgrades in June and with nearly 40% of all upgrades out of the rating category so far in 2022, S&P said.

The consumer products and capital goods sectors face the highest risk of downgrades from B-, according to the release.

Exela bonds up

Exela Technologies’ 11½% first priority senior secured notes due 2026 (Caa3/CCC-) were among the most active junk distressed names seen trading on Tuesday, a source said.

The bonds rose 1 1/8 points to 30 5/8 bid on $13 million of paper traded.

Exela’s stock sank $1.06, or 36.43%, by the close to $1.85 on volume of more than 24.7 million shares.

The Irving, Tex.-based software and services company announced it approved a 1-for-20 reverse stock split of the company’s common stock that took effect after the market closed on Monday.

Under the reverse split, each 20 shares of Exela outstanding common stock will be automatically combined and converted into one issued and outstanding share of common stock.

Exela now has 64.8 million shares outstanding.

The stock began trading on a split-adjusted basis on the Nasdaq on Tuesday.

In June, Exela reported it closed on a $150 million three-year financing facility that replaced its existing securitization facility.

Transocean stronger

Transocean’s 11½% senior guaranteed notes due 2027 (Caa3/CCC) were quoted at 90¾ bid on Tuesday on $11 million of secondary volume, according to a market source.

The notes moved about ½ point higher on the day after trading as high as 91 7/8 bid earlier in the session.

Transocean’s 8% debentures due 2027 (Ca/CCC) rallied 3 points to 60 bid by the close, attracting $3 million of secondary supply.

The Vernier, Switzerland-based offshore driller’s 7½% senior notes due 2026 (Ca/CCC) also traded 2¾ points better on Tuesday at 62¼ bid. Trading volume totaled $2 million.

Transocean Ltd. plans to report second-quarter earnings results on Aug. 1.

Party City lower

Party City Holdings’ 8¾% senior secured notes due 2026 (B3/B-) moved 2 points lower on Tuesday to 61¾ bid and carrying a yield of 25.85% on $4 million of trading volume, a source said.

The issue was down 2 1/8 points on Monday.

Party City sold $750 million of the notes in February 2021 at par.

The company’s stock also closed down 17 cents, or 13.49%, on Tuesday to $1.09.

The Rockaway, N.J.-based retailer plans to release second-quarter financial results on Aug. 8.

Distressed index positive

The S&P U.S. High Yield Corporate Distressed Bond index remained positive at the start of the last week of July.

One-day total returns were 0.29% on Monday, down from 0.74% on Friday and 0.67% in the same session a week ago.

Month-to-date total returns climbed to 2.1% on Monday, up from 1.8% on Friday and minus 1.13% in the week-ago session.

Year-to-date total returns also improved to minus 21% on Monday versus minus 21.23% on Friday and minus 23.5% in the July 18 session.

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