Community Health bonds move up; Endo mixed; GPS, Carrols Restaurant paper mostly quiet

By Cristal Cody

Tupelo, Miss., July 28 – Community Health Systems Inc.’s bonds treading in distressed waters saw some improvement Thursday after plunging more than 15 points in the prior session.

The care and outpatient facilities operator’s senior secured notes rose about 3¼ points to more than 6 points following Community Health’s report of a heavy second-quarter loss.

Endo International plc’s senior secured notes traded flat to better over the day, while the unsecured paper softened after the company announced a slew of news regarding its missing bond payments.

The company reported it paid off one interest payment that it skipped in June but plans to miss payments on two more bonds in the week ahead.

Stocks continued to ramp up Thursday after gaining Wednesday following the Federal Reserve’s 75 basis point rate hike.

The iShares iBoxx High Yield Corporate Bond ETF added 79 cents, or 1.02%, to $77.96.

Market volatility was down with CBOE Volatility index off 3.53% at 23.42.

Paper from Burger King franchisees remained higher on the week after Moody’s Investors Service cited the companies for weak operating performance.

Burger King and Pizza Hut franchise owner GPS Hospitality Holding Co. LLC’s senior secured bonds were quiet on Thursday after softening ¼ point the previous session after Moody’s gave the issuer a negative outlook.

Carrols Restaurant Group Inc.’s 5 7/8% senior notes due 2029 (Caa2/CCC) has been quiet amid a midweek ratings downgrade from Moody’s. The notes were last seen earlier in the week trading ½ point better.

CHS paper moves higher

CHS/Community Health Systems, Inc.’s paper saw some recovery on Thursday after plunging more than 15 points the previous day, a source said.

CHS’ 6 7/8% senior secured notes due 2029 (Caa2/CCC/CCC) jumped 3¼ points to 54¼ bid by the end of the session.

The notes sank nearly 20 points on Wednesday. The issue opened the week at the 65¾ bid area.

Community Health’s 6 1/8% senior secured notes due 2030 (Caa2/CCC/CCC) rallied 6 3/8 points to 54 3/8 bid by late Thursday.

CHS’ notes plunged more than 15 points on Wednesday. The paper traded at 65½ bid at the start of the week.

The Franklin, Tenn.-based operator of acute care and outpatient facilities reported Wednesday a second-quarter net loss of $326 million, or $2.52 a share. Revenue fell 2.4% in the quarter ended June 30 from a year ago.

Endo secureds flat to higher

Endo’s paper was mixed following the company’s announcement in an 8-K filing with the SEC before the markets opened on Thursday, a market source said.

Endo subsidiary Par Pharmaceutical Inc.’s 7½% senior secured first-lien notes due 2027 (Caa2/CC) rose ¾ point on the day to 81 bid.

Endo Luxembourg Finance Co. Sarl’s 6 1/8% senior secured first-lien notes due 2029 (Caa2/CC) went out flat at 80 bid.

Endo Finance LLC’s 6% senior notes due 2028 (C/C) fell about ¼ point to ½ point to 7½ bid after last trading Wednesday at 7¾ bid.

Endo International reported that it made the approximate $38 million interest payment the previous day on its 6% notes due 2028 after electing not to pay it on June 30.

Endo remains in a 30-day grace period that expires on Aug. 14 after missing the $1.9 million payment due July 15 on its 5 3/8% senior notes due 2023.

Endo also reported Thursday that it has elected to not pay interest payments of $45 million coming due on Sunday on its 9½% senior secured second-lien notes due 2027 and $600,000 due Monday on its 6% senior notes due 2025.

The company will have 30-day grace periods before an event of default is declared.

Endo states its decision to skip the payments was not driven by cash problems since it had about $1.4 billion in cash as of March 31, but said it has chosen to enter the grace periods as it continues discussions with certain creditors in connection with its evaluation of strategic alternatives.

The Dublin-based pharmaceuticals company has settled several opioid-related lawsuits in 2021 and 2022, including a $65 million settlement with Florida announced in January.

GPS notes soft

GPS Hospitality’s 7% senior secured notes due 2028 (Caa1/B-/CCC+) quieted in the secondary market on Thursday after trading Wednesday down ¼ point at 65¼ bid, a market source said.

The issue was up ¼ point on the week.

Moody’s changed the issuer’s outlook Wednesday to negative from positive based on weakened operating performance and unsustainable high financial leverage.

The Atlanta-based privately held company is a franchisee of Burger King, Pizza Hut and Popeyes Louisiana Kitchen restaurants.

Carrols quiet

Also in the fast-food space, Carrols Restaurant Group’s 5 7/8% senior notes due 2029 (Caa2/CCC) have been mostly quiet and were last seen trading Tuesday at 72¾ bid, up ½ point on the week, a source said.

Moody’s said Wednesday that it downgraded Carrols and the company’s notes based on weakened operating performance and very high financial leverage.

The Syracuse, N.Y.-based company operates more than 1,000 Burger King and Popeyes Louisiana Kitchen restaurants in the United States.

Distressed returns rise

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns improved on Wednesday to 0.04% from minus 0.29% on Tuesday but was down from 0.29% on Monday.

Month-to-date total returns were at 1.84%, compared to 1.8% on Tuesday and 2.1% at the start of the week.

Year-to-date total returns came to minus 21.2% on Wednesday, minus 21.23% on Tuesday and minus 21% on Monday.

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