I think, it looks to me that one or two of the big holders decided to bail so they just smacked everything. Hard to know though.
I think someone might be required to sell as the company could be in technical default. The earnings sucked (if that was going to be a surprise) but they can still clean up all the debt they have due through 2020 if they can keep their revs flat from here (which is an *if*).
No warning on the restatement... but then, this was THE warning. A bunch of buy-side knowing that they can't own something in a technical default, as you state.
The bonds seemed to be down anywhere from -3% to -13%. Most were down 7% or less. So yeah, this looks like capitulation or forced selling by some of the big funds on the stock side. You would expect the bonds to be down more on real bk risk
I can't easily see the live yields, but 5y CDS appears to be at 721bps, up arnd 141.5 points on the day.
What is the increase in the implied default probability? certainly seems less than the impression you would get by looking at the stock
You have to approximate the recovery-rate. It makes the prob hard to calc. I would think the recovery rate is North of 40%. Prob of Y1 default = yield on VRX bonds over RFR / (1 - recorate) You can solve for it with the CDS, but you still need the recorate.