Community Health paper mostly lower on debt talks; energy names mixed; Altice, Frontier firmer

By Paul Deckelman

New York, Nov. 20 – Traders saw a generally somewhat firmer tone in distressed debt and bonds of otherwise underperforming companies and sectors on Monday, kicking off what is expected to be a generally quiet holiday shortened weekend in the United States, with the debt markets closed Thursday for Thanksgiving.

But traders said that Community Health Systems, Inc.’s paper was mostly lower by several points, on news that it was in talks with bondholders on a possible debt exchange for its $2 billion of 2019 notes, although those particular bonds were higher on the news.

Energy bellwether issue California Resources Corp. was firmer on the day, despite a drop in crude oil prices on profit-taking following Friday’s big gains. But sector peers like EP Energy Corp. and Denbury Resources were lower.

In the communications sphere, European telecom and cable operator Altice SA’s bonds were seen better, as was domestic wireline provider Frontier Communications Corp.

Real Alloy Holding Inc.’s bonds were retreated Monday after having gyrated on Friday following the Chapter 11 filings by the aluminum recycling company’s U.S. operations and its holding company corporate parent, Real Industry, Inc.

Community Health mostly lower

A trader said that Community Health Systems’ bonds were “mostly down” by 2 to 3 points across the Franklin, Tenn.-based hospital operator’s capital structure, on the news that the company is in talks with a group of bondholders to extend approximately $2 billion in bonds coming due in 2019.

Its 6 7/8% notes due 2022 were down more than 3 points, at 59¼ bid, while its 7 1/8% paper due 2020 lost 2½ points to close at 73¼ bid, with over $37 million of each having traded.

However, the 8% notes due 2019 that may be extended in such a debt swap firmed by 5/8 point Monday to 89½ bid, on volume of more than $23 million.

The Wall Street Journal, quoting “people familiar with the matter,” said that the company – burdened by nearly $14 billion of debt – is in talks to swap the 2019 unsecured notes for debt secured by its assets.

The report said that CHS would need permission from its lenders to waive a credit facility covenant that limits the amount of new secured debt it can issue without such permission to about $1 billion.

Energy credits mixed

Traders said that energy issues were mixed on the session, with the sector benchmark California Resources 8% notes due 2022 up around ½ point on the day in the 72½-to-73 bid area, with over $24 million of the Los Angeles-based oil and natural gas exploration and production operator’s bonds having changed hands.

But Plano, Texas-based sector peer Denbury Resources’ 6 3/8% notes due 2021 lost ½ point, ending at 73 bid, while Houston-based EP Energy’s 9 3/8% notes due 2020 slid by more than 2 points, to just under 76 bid.

The price movements came against a backdrop of easier crude oil prices, largely due to profit-taking after Friday’s big gains on world commodity markets.

West Texas Intermediate fell by 46 cents per barrel on the New York Mercantile Exchange Monday, settling at $56.09, after having jumped by $1.41 per barrel on Friday after three straight losses before that.

And North Sea Brent crude retreated by 50 cents per barrel in London futures trading, to $62.22; on Friday, Brent had broken out of a five-session slump, rising by $1.36 per barrel.

Telecom names improved

In the communications realms, Netherlands-based cable and telecom operator Altice’s 7½% notes due 2026 firmed by 5/8 point to 106 7/8 bid, and its SFR SA subsidiary’s 7 3/8% notes due 2026 gained 1¼ points to 103 3/5 bid.

The company’s paper had been down by multiple points on Friday, as investors warily examined the company’s promises to shift its focus from debt-funded acquisitions to bringing down its estimated €50 billion equivalent debt load.

On the domestic scene, a trader said that Stamford, Conn.-based wireline services provider Frontier Communications’ 11% notes due 2025 were “modestly higher” at 78½ bid.

Another trader who also saw the notes at 78 ½ said they were up more than 1½ point on the day, with over $18 million traded.

Bankrupt Real Alloy eases

A trader saw Real Alloy Holding’s 10% notes due 2019 down 1½ points on the day, ending at 63½ bid.

On Friday, the notes had gyrated around, falling down into the mid-50s but then firming off those lows to around 65 bid, as investors reacted to the news that the New York-based metals recycling company’s U.S. units, and its holding company corporate parent, Real Industry, Inc., had filed for Chapter 11 protection.

The notes were trading flat, or without their accrued interest, following the bankruptcy filing.

Those notes had been trading in the lower 90s as recently as late October, but then had dropped to around 77¾ by the start of last week.

© 2015 Prospect News.
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