Intelsat up on numbers; hospitals hit again; energy names off despite crude price rise

By Paul Deckelman

New York, June 27 –Traders saw relatively quiet dealings in the bonds of underperforming and distressed issues on Thursday, in line with lighter flows within the larger high-yield bond market, which was mostly lower.

But Intelsat SA’s various note issues were higher on the day, gaining altitude after the communications satellite company reported better second-quarter numbers and expressed confidence in its ability to meet its debt maturities over the next few years.

Hospital operators’ bonds, on the other hand, remained under pressure after Community Health Systems, Inc. issued preliminary second-quarter numbers, including sagging sales and wider losses. Its own bonds were the volume leaders on the day, while the contagion spread to sector peer Tenet Healthcare Corp.’s bonds.

Energy names were seen largely on the downside despite a fourth straight day of higher crude oil prices on world commodity markets. Losers included QEP Resources, Inc., Whiting Petroleum Corp. and EP Energy Corp. But California Resources Corp., normally a sector bellwether credit, was little traded on the day.

Healthcare names get hit

A trader opined that, “there was some activity in the hospitals.”

Community Health’s 6 7/8% notes due 2022 “were very active,” trading up ¼ point to 86 bid

He noted that the Franklin, Tenn.-based hospital operator’s issue “rebounded by ¼” – after having gotten clobbered to the tune of around 4 points on Wednesday, coinciding with the release of the company’s disappointing second-quarter preliminary results.

Among those numbers were a 10.8% fall in total admissions versus a year ago and a 2.5% drop in admissions at “same-store” hospitals the company had also operated last year.

That in turn led to a nearly 10% fall in revenues from the year-ago quarter, with management projecting a net loss of $137 million, or $1.22 per share. On an adjusted basis, the loss should come in around 25 cents per share – versus Wall Street’s expectations of a modest 6 cents per share profit for the period.

In Wednesday’s dealings, the trader said the company’s 6 1/8% notes due 2023 were down ¼ point to 102¼ bid and there was “also some activity in the 7 1/8% notes due 2020, unchanged but active.”

A second trader agreed that Community Health debt “continues to be pretty active.”

He said that the issue of 6 7/8% notes was going out at 85½-86, “not too much different than where it had been yesterday [Wednesday].”

Wednesday “was the day they really fell. They got clobbered, trading in the morning with an 89 handle but by the end of the day, it was in an 85-86 context. So after getting beat up for almost 4 points [Wednesday], it traded sideways for the most part today, in an 85-86 context, at the higher end of that range in the afternoon.”

Another market source said the 6 7/8% notes were the busiest bond in Junkbondland, with over $30 million changing hands, followed by the 6¼% notes, with over $20 million traded, and the 7 ¼% paper, generating over $19 million of turnover.

Community Health’s Dallas-based rival, Tenet Healthcare’s 7% notes due 2025 were down almost 2 points on the day at 98, a trader said. Its 5 1/8% paper due 2025 was down 1½ points at 100¼ bid.

Tenet’s 8 1/8% notes due 2022 were down 1½ points to 107 bid.

Intelsat on the rise

Away from the healthcare debacle, traders saw Intelsat’s notes higher across the board, including the Luxembourg-based communications satellite company’s recently priced Intelsat Jackson Holdings SA 9¾% notes due 2025 which were up ¼ at 102 1/8 “on a bunch of trades,” one trader said.

Volume in that issue, which priced at par on June 19, amounted to more than $14 million, landing it high up on the day’s Most Actives List.

The trader also saw Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 up around ¼ point to 60 bid while the company’s 5½% notes due 2023 gained 1/8 point to end at 85 5/8 bid.

Another trader said: “Intelsat’s numbers were out, getting pretty good.”

He said that “the bonds have already been rallying into earnings so there wasn’t a tremendous amount of reaction – but I would say the bonds continued to trend higher.

He saw “the LuxCo bonds up ½ point to 1 point, while the Jackson paper was marginally better.”

Intelsat reported second quarter revenues of $533 million, down slightly from market expectations – but its 20 cent per share adjusted net loss was considerably smaller than the 30 to 35 cents of red ink most analysts were forecasting.

During the company’s conference call, its chief financial officer expressed confidence in the company’s ability to meet its several billion dollars of junk bond and term loan maturities that will be coming due within the next three years (see related story elsewhere in this issue).

Energy lags despite oil rise

Back on Earth, traders saw oil and gas-related credits – recently on a roll, in line with surging crude oil prices – falling back on Thursday, even as crude continued to strengthen on world commodity markets .

For instance, a market source quoted Denver-based exploration and production company QEP Resources’ 5¼% notes due 2023 down 1½ points at 97½ bid, with over $18 million moving around.

“Even with oil up, some of the energy guys were lower,” another trader said.

He pegged Denver-based Whiting Petroleum’s 5% notes due 2019 down 1 point to 98¼ bid on volume of over $14 million.

London-based offshore energy drilling contractor Ensco plc “was a little under pressure,” he said, with its 5¾% notes due 2024 trading down 5/8 point to 66¾.

Another trader said: “It’s interesting – a name like California Resources Corp.’s 8% notes due 2022, pretty much a sector bellwether that normally trades pretty actively – I don’t think there was one round-lot trade today.”

He saw Houston-based EP Energy’s 8% notes due 2025 – which he also called something of a fairly active energy sector bellwether issue – lower on the day Thursday.

He said those bonds “went out yesterday straddling 79, today they went down a point, 77½ to 78.”

The energy credits retreated despite a fourth straight strong session for world crude prices. September-delivery West Texas Intermediate crude gained 29 cents per barrel, ending at on the New York Mercantile Exchange at $49.04, while September-contract North Sea Brent crude closed up 52 cents a barrel in London trading at $51.48.

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