Walter Investment bonds jump, converts slide on reorganization plan news; healthcare, retail names active

By Paul Deckelman

New York, Oct. 23 – Traders in distressed debt and the bonds of other underperforming companies and sectors saw a mixed bag of activity on Monday.

One of the big names was mortgage banking company Walter Investment Management Corp., which said that it is seeking restructuring support agreements from its lenders and expects to file a pre-packaged Chapter 11 reorganization plan next month.

Its straight junk bonds were heard by traders to have firmed smartly on that news – but its convertibles issues traded off.

Elsewhere, traders saw some activity in healthcare names such as pharmaceuticals maker Endo International plc, which firmed smartly, and hospital operator Tenet Healthcare Corp., whose bonds were mixed.

In the retailing space, Toys ‘R’ Us, Inc.’s recently active 2018 notes were little changed, on considerably less volume.

Traders also saw Sears Holdings Corp. paper continuing to gyrate around.

Walter bonds bounce

A trader called Walter Investment Management Corp.’s bonds “one of the big winners on the day,” quoting them at 59 bid, which he called a 4¼-point jump on the day.

A second trader also saw the Fort Washington, Pa.-based mortgage loan originator and servicer’s paper ending “up several points” at 59, on volume of over $10 million.

Walter announced on Monday that it is seeking restructuring support agreements from its lenders and expects to file a pre-packaged plan of reorganization under Chapter 11 bankruptcy in late November.

The company envisions cutting its debt by about $700 million (see related story elsewhere in this issue).

But convertibles slide

But while bondholders were heartened by Walter’s announcement, holders of its convertible notes were dismayed; those notes traded down to a new low on news of the planned reorganization.

The Walter 4.5% convertible notes due 2019, which are included in the recovery plan, traded at 11.5 early Monday, according to a New York-based trader. At the market close, the indicated level of the issue was 11 bid, 13 offered, a second trading source said. In August, the bonds were over 40.

Walter sold $265 million of the convertibles in October 2012.

Walter’s shares, which have been trading below a dollar since last June, dropped sharply on Monday by 7 cents, or 14%, to $0.4361.

Healthcare names mixed

Elsewhere, traders saw healthcare-related names mixed on the session.

One of the busiest was Dublin-based pharmaceutical company Endo International plc’s 6% notes due 2023, which saw more than $10 million traded. They jumped by 1 7/8 points to end at 83 5/8 bid.

A second trader saw the company’s 6% notes due 2025 likewise up by 2½ points on the day to close at 82. However, he saw no fresh news out on the company that might explain that jump.

Endo’s Nasdaq-traded shares lost 24 cents on the day, or 3.11%, ending at $7.48. Volume of 3.2 million shares was about half the norm.

Also among the drug names, a trader saw troubled Canadian pharma company Concordia International Corp.’s 9% secured notes due 2022 gain 2¾ point on the day to end at 86¾ bid on “a fair amount of trading.”

He also saw the Oakville, Ont.-based drugmaker’s unsecured 7% notes due 2023 up 1 point at 13 bid.

On Friday, Concordia said it had initiated a court proceeding under the Canada Business Corporations Act as the next step in its efforts to realign its capital structure.

Its announcement follows its Oct. 16 decision to use a 30-day grace period to defer the payment of roughly $26 million of interest on its $735 million of unsecured notes.

Concordia said its management will continue to lead day-to-day operations while meeting commitments to employees, suppliers and customers.

Away from the drug names, a trader said that Dallas-based hospital operator Tenet healthcare Corp.’s 6¾% notes due 2023 lost 1/8 point on the day to end at 96 1/8 bid, although its 8 1/8% notes due 2022 gained 3/16 point to close at 101 5/8 bid, both on about $10 million of volume.

Franklin, Tenn.-based hospital company Community Health Systems Inc. lost 3/8 point to close at 76 bid.

Sears paper busy

In the retailing space, a traders said that Sears Holdings’ 8% notes due 2019 were trading at 66¾ bid, which he called down at least 8 points from recent round-lot levels. But he noted there had not been any such large trades in the bonds of the Hoffman Estates, Ill.-based operator of the Sears and Kmart department stores for a number of days.

A second market source said the bonds had indeed traded up to 75 bid around the middle of last week.

Since then, he said, it had been all odd-lot trading, with the Sears bonds bouncing all around.

Just on Monday, which saw $3 billion trade on a round-lot basis, there had been smaller transactions as low as 59 bid and as high as 70.

Elsewhere among retailers, bankrupt Wayne, N.J.-based Toys ‘R’ Us’ 7 3/8% notes due 2018, which have recently been busy, were unchanged at 41 7/8 bid, on not much volume.

Those notes had zoomed last week into the lower 40s from prior levels in the upper 20s, on busier volume, moved by the possibility the company may raise capital via an IPO for its Asian unit, which was not included in Toys’ recent U.S. Chapter 11 filing.

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