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PetSmart bonds are coming out of the doghouse.

The pet-products seller saw its high-yield 7.125% 2023 bonds -- one of its riskiest bond floatings on the market -- tank to as low as $0.48 on the dollar in May as worries of the company's cash flow put a huge dent in debt investors' confidence. But the bonds came roaring back Tuesday -- not all the way to face value, but at least to $0.735 on improved earnings for the business. The most notable earnings improvement came in PetSmart's unit, which saw a 22% revenue increase year over year in its latest quarter, according to a person familiar with the company.

The bonds are still classified as distressed debt, and S&P Global Ratings downgraded the bonds to CCC in June from a previous from CCC+ on anticipation that PetSmart would execute a debt exchange by next June 30. PetSmart issued the 2023 bonds as part of a buyout in which a group of private-equity players led by BC Partners bought the pet product retailer for $8.7 billion in 2014.

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