Senate health care drives Valeant, Community Health higher; E&P up with oil gains; PetSmart continues slide

By Colin Hanner

Chicago, June 22 – The distressed debt market saw health care and pharmaceutical bonds gain on the heels of the much-coveted Senate health care bill, which finally came to light on Thursday.

Among those that saw gains were Laval, Quebec-based Valeant Pharmaceuticals International, Inc. and Franklin, Tenn.-based hospital group Community Health Systems, Inc.

“It was hard not to find anything that wasn’t healthcare or oil on the day,” a market source said.

Elsewhere, the exploration and production sector caught a break with higher crude oil prices after several downtrodden sessions due to worries surrounding the Organization of Petroleum Exporting Countries’ ability, or lack thereof, to regulate the global supply glut.

California Resources Corp. and EP Energy Corp. were among the day’s gainers.

And pet retailer PetSmart Inc. continued to slide in three of its issues, with retail woes and company worries fueling the bonds losses.

Bill boosts pharma, hospitals

The bill to repeal and replace Obamacare was made public on Thursday, with much of the health care community rejoicing in the bond market.

In contrast to the several House versions of the Republican-backed health care legislation, which caused hospital and health care operators to fret due to the more-immediate proposal of Medicaid cutbacks, hospital groups surged on the slower-paced cuts to Medicaid.

Community Health’s 7 1/8% notes due 2020 were up 3/8 point to 96, and its 6 7/8% notes due 2022 were up 1½ points to 86½.

Community Health’s stock was up 45 cents, or 5.10%, to $9.27. It had spiked as high as $9.67 during intraday trading.

Under the bill, expansion to Medicaid would cut off in 2021 – an additional year as compared to the House bill – and the growth rate of the program would effectively be cut down starting in 2025.

And, according to media reports, $50 billion would be allocated to insurance exchanges, which have come under scrutiny from health care providers in recent months and have caused many to drop out of the exchanges as a result.

Four Republican senators have already publicly opposed the bill, which is expected to go under scrutiny by the Congressional Budget Office for the next few days before going before the Senate for a vote later in the week.

Lower drug prices, a frequently lauded tenet of President Trump’s campaign, were largely left out of the bill, prompting pharmaceutical companies’ bonds to surge.

On Tuesday, The New York Times reported that a draft of an executive order regarding drug pricing, which the outlet obtained, would largely benefit pharmaceutical companies, including pushing stronger overseas commerce for companies, as well as “scaling back” discounts to low-income patients through a federal program that does just that.

Valeant’s 6 1/8% notes due 2025 were the “most actively traded bond of the day” in the secondary market, traders said, gaining 1½ points to finish at 84.

Its 6 3/8% notes due 2020 were up 1½ points to 97½, and its 5½ % notes due 2023 were up 1¾ points to 84¼.

Valeant’s stock was up $1.82, or 13.30%, to $15.50. It had spiked as high as $15.67 during intraday trading.

Endo International plc’s 6% notes due 2023 were unchanged at 85.

E&P rebounds with steady oil gains

“Oil and gas all bounced back today after oil held steady,” a market source said, referring to West Texas Intermediate crude’s ½-percent increase to $42.78.

This was the first such reprieve since WTI went into the bear market two sessions ago.

California Resources 8% notes due 2022 were up 2 points to 59½, though traded as high as 60, market sources said.

Continental Resources Inc.’s 5% notes due 2022 were up 1 to 96½.

EP Energy Corp.’s 8% notes due 2025 were up “2 and change points” to 73¾.

PetSmart lower, again

The pet retailer continued to slide on Thursday, with the worries of the traditional retail sector undergoing structural changes, as well as PetSmart’s own concerns, fueling the selloff.

The 8 7/8% notes due 2024 were down 1½ points to 90½, a market source said, while the 5 7/8% notes due 2024 were down 1 3/8 points to 94½.

Its 7 1/8% notes due 2023 were down ½ point to 87 7/8.

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