Community Health jumps on results; Valeant follows after annual meeting; California Resources drops

By Colin Hanner

Chicago, May 2 – Earnings in health care had the sector intensifying in the distressed debt market on Tuesday, market sources said, with Community Health Systems, Inc. leading the way after posting better-than-expected first-quarter results.

It was the most actively traded issue of the session in the distressed arena, a trader said.

Seeing a similar resurgence was Valeant Pharmaceuticals International, Inc., which was noticeably higher after the company’s annual meeting yielded discussion about a reduction in the company’s overall debt.

Energy – oil and oil-related names in particular – was down following yet another session of depressed crude oil future prices, with California Resources Corp. posting another declining session.

Joining the mix of reactions to quarterly earnings, Rent-A-Center, Inc. was higher after delivering solid earnings.

Rental and car sales company Hertz Global Holdings, Inc. was mixed on the session following figures from automakers that showed a continued decline in the industry.

Rounding out the market’s movement were two series of iHeartCommunications, Inc. notes, which moved higher on the day.

Health care, pharma soars

Community Health was very active in the distressed sphere, specifically its 6 7/8% notes due 2022, which were up 2¼ points to 87¾, a trader said.

Its 7 1/8% notes due 2020 were up 1½ points to 94½.

In addition to its earnings, the Franklin, Tenn.-based Community Health announced it completed the sale of its ownership in two Mississippi hospitals, along with their respective assets, according to a news release.

Community Health announced net operating revenue of $4.49 billion and earnings per share of 8 cents, beating market expectations by both accounts.

Loss from continuing operations was $199 million, compared to net income of $11 million during the same period last year. Year-over-year revenue decreased by 10.3%.

The company’s debt continued to fall into the first quarter, lowering to $14.69 billion from $14.8 billion a quarter prior, and down from $16.67 billion a year prior.

Community Health’s stock was up $1.70, or 19.72%, to $10.32 on the day.

In the high-yield space, Tenet Healthcare Corp.’s 8 1/8% notes due 2022 were up 2 3/8 points to 104½, also reacting to quarterly results, though more so to a multi-year agreement with Humana, as well as continued asset sales.

In pharmaceuticals, Valeant was higher after chief executive officer Joe Papa called for cutting the company’s $30 billion debt load in half, as well as a possible name change to the company, shifting away from the stigma the company has received in recent times.

Its 6 1/8% notes due 2025 were up ¾ point to 75¼, a trader said, followed by its 6¾% notes due 2021, which were up 3/8 point to 83 5/8.

The 7½% notes due 2021 were up 1¼ points to 84 5/8.

Valeant’s stock was up 65 cents, or 6.73%, to $10.31.

Fellow Canadian pharmaceutical company Concordia International Corp.’s 9½% notes due 2022 were unchanged at 20.

Down goes oil

Crude oil futures were down well below $48 a barrel with the expectation that stockpiles will increase on Wednesday, seen to offset any progress Organization of Petroleum Exporting Countries is making to curb the glut.

California Resources’ 8% notes due 2022 were down 1¾ points to 74.

Houston-based EP Energy Corp.’s 8% notes due 2025 were down ¾ point to 88¼.

Offshore drilling contractor Noble Holdings International Ltd. was down ¾ point in its 7¾% notes due 2024, which finished at 89¾, a trader said.

Its 7.7% notes due 2025 were down ½ point to 88½.

Offshore ultra-deepwater driller Pacific Drilling Co.’s 5 3/8% notes due 2020 were down 1¾ points to 47½, a trader said.

Distressed wrap-up

Beating market expectation, rent-to-own retailer Rent-A-Center’s 4¾% notes due 2021 reflected the market acceptance of its quarterly earnings on the session, posting a 1½-point gain to finish at 89½. Earnings per share of 4 cents beat estimates, though total revenue of $742 million showed an 11.2% year-over-year decline.

Ahead of its earnings release next Monday, Hertz’s 5½% notes due 2024 were unchanged at 85, while its 7 3/8% notes due 2021 were up ¼ point to 96.

Energy producer Talen Energy Corp.’s 9½% notes due 2022 were down 3 points to 89¾, though no company-driven news drove the decline. In a similar sector, NRG Energy Inc. released disappointing quarterly results on the session and its subsidiary, GenOn Energy Inc., saw a 1-point decline in its 9½% notes due 2018, which finished at 62¼.

Global shipper Navios Maritime Holdings Inc.’s 7 3/8% notes due 2022 were down ½ point to 85¾.

And two series of bonds for iHeartCommunications were higher on the day.

Its 14% notes due 2021 were up ¼ point to 29, while its 9% notes due were up 3/8 point to 76.

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