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This was a rough week. Thursday night I wrote about how hard this market is, not just "spreads are a little wider" hard. A lot of specific problems are showing up all at once, and the index is masking the dispersion in lower quality risk. Great investors are having humbling years. What matters now is cash, relationships and credit selection. Every great credit vintage has started like this. This too shall pass.

Let’s get to it.

Thursday's AI selloff sent everyone running for cover, and for once cover meant Treasuries. Rates rallied and junk yields went up anyway, and the spread on the riskiest names widened faster than Treasuries fell. If you owned CCCs, the rally in rates did nothing for you. Meanwhile, the new-issue calendar dried up, an airline's creditors called restructuring bankers at PJT, and some of the better-known distressed funds had a rough month.

If you read nothing else:

Rates rallied, spreads didn't care. The 10-year fell 14bp on the week to 4.96%, but HY OAS widened to 340bp from 323bp. That pushed the HY effective yield up to 8.14% from 8.08%. CNBC called Thursday's Treasury move a flight to safety on the AI selloff, the first close below 5% since Sep 23.

CCCs kept going. CCC & lower OAS widened 62bp to 1,340bp on Oct 22, the widest in FRED's ICE data going back to October 2023. Its yield hit 17.99%. BBs widened 13bp and IG 5bp. A month ago, HY OAS was 268bp, so the index is 72bp wider in four weeks.

High-yield funds lost $1.68 billion in the week to Oct 21, according to LSEG Lipper. US bond funds as a whole posted their first outflow in 27 weeks. The Morningstar LSTA US Leveraged Loan Index returned -0.22% for the week to Oct 22.

The window is mostly shut. More than $5 billion of US and European deals were postponed in October, and AVI-SPL walked away from a $690 million loan.

Grant Thornton pays up. The New Mountain-backed firm raised $2.25 billion for its $5 billion CBIZ deal: $1.75 billion of five-year dollar notes at 10.5% and a €500 million-equivalent tranche at 9.5%. A double-digit coupon on an accounting firm buyout is where this market is right now.

Radiology Partners switches lanes. It pulled a $485 million loan add-on and sold $485 million of 9.75% secured 2032 notes instead, at about a one-point discount and roughly 10% all-in, to fund the Everlight acquisition. When loan investors won't take the paper, bond investors will, at a price.

What's happening: Senior creditors, including holders of the $2 billion 2031 bonds and a $742 million first-lien loan, are working with PJT Partners and Akin (WSJ, Bloomberg). The stock closed at $2.65 on Oct 22, its lowest since the 2002 IPO.

Why now: Fuel costs are crushing margins. JetBlue had $1.66 billion of cash against $8.5 billion of debt and finance leases at June 30, according to Reuters.

What's at stake: Another airline could fall. Bonds in the low 40s are pricing a restructuring, not a regular refinancing. Moody's has it at Caa2 and S&P at CCC+. About two-thirds of JetBlue's property, equipment and intangible assets are already pledged as collateral, according to the WSJ, so there's less left to borrow against. With the stock at the lows, there's no equity cushion and any fix will have to come out of the debt. The gap between the secured classes and everyone else will decide who gets hurt.

What to watch: Q3 earnings on Tuesday, Oct 27, before the open, with the call at 10am ET. Expect questions about liquidity, not load factors.

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AI credit: everyone pays more now. On top of the CoreWeave slide, SpaceX's $40 billion AI financing is coming at about 8.3% on the lowest tranche and 7.75% on the safer chip-backed piece, more than a point over its existing bonds. Bloomberg says price talks have gotten complicated, with a $25 billion to $30 billion subordinated tranche in the mix. Apollo and Goldman Sachs are said to be leading the financing. When even the best-known names have to pay a point more, the neoclouds have to pay a lot more.

Optimum: the keys are en route to the lenders. Patrick Drahi’s Optimum is nearing a deal that hands control to lenders including Apollo, Oaktree and JPMorgan, and is preparing a Chapter 11, possibly before year-end, to implement it on about $26 billion of debt. Last week Drahi was asking for about $3 billion of equity against roughly $500 million on the table. The telecom tycoon is notorious for his negotiating prowess.

Navient: bondholders left out. A new holding company structure moves the notes to Navient LLC and separates Earnest. CDS widened 175bp to 622bp, the most since 2018. The CDS market read the org chart before anyone else did.

EyeCare Partners: par for some, a haircut for others. The Partners Group-backed company could cut up to $400 million from about $2 billion of debt. Sale proceeds would repay the $110 million revolver and $286 million first-out term loan at par, and take out about $164 million of second-out at a 12-point discount, alongside a distressed exchange into a new 1.5-out tranche.

Car-Mart: another week of runway. Lenders extended the waiver through Nov 1 and added $5 million of incremental term loans, with $200,000 of fees paid in kind, per an 8-K. The company is also in sale talks.

Vestel: pick your poison. Holders of the $500 million 9.75% 2029s can keep par and extend to 2035 at 4%, or take a 45% haircut into 6% 2032s. Instructions are due Nov 6 and the meeting is Nov 11.

Virgin Media O2: the CMA isn't blinking. Last week we flagged the CMA's provisional finding against nexfibre's purchase of Substantial, Netomnia's parent. On Oct 20 the CMA said the parties hadn't offered a remedy and named blocking the deal as an option. Comments are due Oct 27, and the deadline for a final decision is Dec 15. As one reader pointed out, the hit to VMO2 is likely bigger than the £950 million of upfront cash once you include the higher capex and the loss of the cost-savings program.

Getty files a prepack. Getty Images filed in Delaware on Oct 21 with up to $533 million of new equity from the Getty family and Koch Equity Development, plus a KED-provided DIP of up to $143 million. Unsecured notes get about $170.2 million of cash, and Getty plans to exit as a private company by year-end. The family and Koch are effectively buying the company back through the bankruptcy.

Braskem gets an involuntary. Bracebridge-linked funds holding about $272 million of 2041 notes filed an involuntary Chapter 11 against Braskem America Finance in the SDNY on Oct 20. Judge Wiles has the case. On Oct 24, Braskem said none of the restructuring proposals for its $11 billion of debt had been accepted. It had shared an updated business plan, its own proposal and one from investors. Valor reports the two sides are converging on a plan with a Petrobras capital injection and debt-for-equity swaps this year.

Hughes noteholders wait. On Oct 20, Judge Perez denied, for now, noteholders' bid to end exclusivity and file a rival plan. They can try again.

Raízen to RD. Fitch cut Raízen to restricted default from C on Oct 22 after a court approved its out-of-court restructuring plan.

Cable One and Cubic get cut. Moody's downgraded Cable One to B3 on Oct 23 and put it on review for a further downgrade. The same day it cut Atlas CC Acquisition, Cubic's parent, to Caa3 with a stable outlook. Cable One also has a court date: lender CoBank's restraining order blocking its $480 million Mega Broadband deal was extended to Oct 30, when Judge Victor Marrero in the SDNY hears it alongside Cable One's motion to dissolve it.

The FCA cleans house. The UK regulator restricted six unregulated lenders on Oct 23 over anti-money laundering concerns.

Barclays gets a look. The Bank of England is reviewing a complaint that Barclays booked private-credit total return swaps in its trading book. Barclays says it followed the rules. It has about £15 billion of private-credit exposure, with about £300 million in the swaps. The trading book needs less capital than the banking book, which is why regulators care where the swaps sit.

Forever is the new exit. Goldman and Evercore are pitching private equity firms on "forever" continuation funds built to hold assets for 10 to 15 years or more. If you can't sell it, keep it.

LSEG buys Octus. LSEG is paying $3.5 billion in cash to buy Octus from Permira and management, with closing expected in the first half of 2027. Octus expects more than $300 million of revenue this year at about a 40% EBITDA margin. As our friend High Yield Harry put it: "Back in my day it was called Reorg."

Distressed funds feel it. Arini's roughly $7 billion master fund lost 6.9% in early October and is down more than 21% for the year, hit by Altice International, Brightspeed, Aston Martin and Adler. Big, concentrated restructuring bets work until the negotiations drag on longer than the marks can wait. Sona's master fund fell 3.1% and gave back all of its 2026 gains, and hedge fund Diameter is said to be in the red as well.

The 10-year closed Thursday at 4.952%, its lowest since Sep 17. The FOMC decides on Wednesday, and CME FedWatch has a hold priced as the heavy favorite. Thursday brings Q3 GDP and September PCE, and Treasury sells $183 billion of 2-, 5- and 7-year notes during the week. The employment cost index lands Friday, and the October jobs report follows on Nov 6. A hold is priced in, so the statement and the press conference do the work. December, with new projections, is the last meeting of the year.

Treasuries made it back. CCCs didn't. From Sep 22 to Oct 22, the 10-year round-tripped to 4.96%. Over the same month, the CCC OAS widened 265bp to 13.40% and BBs widened 54bp while the HY index widened 72bp.

The rates rally isn't helping the weakest credits, and the damage is concentrated at the bottom of the ratings scale.

Source: ICE BofA and US Treasury via FRED, as of Oct 22, 2026.

That’s the week. See you next week.

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