Community Health notes bounce back; Rite Aid gains in July; Bath & Body improves

By Cristal Cody

Tupelo, Miss., July 29 – Community Health Systems Inc.’s bonds perked up on Friday after a midweek plunge on heavy second-quarter net losses.

“They just missed earnings big,” a source said. “They bounced back.”

The care and outpatient facilities operator’s senior secured notes were up about 2 points to 2½ points on Friday following a bump of about 3¼ points to more than 6 points on Thursday after dropping more than 15 points on Wednesday.

The day’s tone stayed mostly positive with stocks stronger on Friday – the S&P 500 index was up 1.42% and the Nasdaq finished 1.88% better.

The iShares iBoxx High Yield Corporate Bond ETF rose 23 cents, or 0.29%, to $78.19.

Market volatility also continued to recede on Friday following the Federal Reserve’s midweek 75 basis point interest rate hike.

The CBOE Volatility index declined 3.85% to 21.47.

“The market’s a little stronger,” a source said. “It’s post-Fed on Friday; the liquidity is just slow.”

July distressed returns were improved over the back half of the month with the S&P U.S. High Yield Corporate Distressed Bond index nearing ending the month up more than 1½%.

“We have a lot of stuff that’s fallen into distressed territory lately,” a market source said.

In other secondary action, Rite Aid Corp.’s 8% senior secured notes due 2026 (B3/CCC-/BB-) rose about 3 points on the week and were higher on the month.

The pharmacy chain’s credit default swap spreads softened less than 50 bps this week.

Bath & Body Works, Inc.’s 6¾% senior notes due 2036 (Ba2/BB) rallied in July and were going out about 10 points better on the month, while its CDS spreads also tightened nearly 100 bps this week.

CHS notes recovering

CHS/Community Health Systems, Inc.’s notes continued to improve on Friday after sliding more than 15 points on Wednesday on the company’s weak second-quarter earnings report.

“They bounced back today,” a source said.

The 8% senior secured first-lien notes due 2026 (B2/B/BB-) were quoted trading around 95½ bid at the close, up 2½ points from Thursday and improved from 86 3/8 bid on Wednesday.

The bonds remain down about 1½ points on the week.

CHS’ 6 7/8% senior secured second-lien notes due 2029 (Caa2/CCC/CCC) went out up around 2 points at around 54 bid by the close.

The notes were down from starting the week at the 65¾ bid area after sliding nearly 20 points on Wednesday.

The Franklin, Tenn.-based operator of acute care and outpatient facilities on Wednesday reported a second quarter loss of $326 million, or $2.52 a share.

Rite Aid notes up, CDS off

Rite Aid’s 8% senior secured notes due 2026 (B3/CCC-/BB-) added about 3 points to head out Friday at 85¼ bid, a source said.

The issue was ending July up more than 4 points on the month.

Rite Aid declined to accept any of the 8% paper tendered in a tender offer it completed in June.

The Camp Hill, Pa.-based drug retailer’s CDS spreads eased 41 bps over the past week ended Wednesday to 1,953 bps, according to a market source.

Bath & Body Works up

Bath & Body Works’ 6¾% senior notes due 2036 (Ba2/BB) improved about 1 point in mostly light trading on Friday to 91 bid but were about 10 points stronger on the month, while its CDS spreads also tightened this week, sources said.

The notes traded at the start of July at 81 bid.

The Columbus, Ohio-based retailer’s CDS spreads also tightened 97 bps for the week ended Wednesday to 497 bps.

On Wednesday, S&P Global Ratings revised the company’s outlook to stable from positive after the company lowered its fiscal year 2022 sales and profit outlook on weaker demand trends.

L Brands Inc. spun off Victoria’s Secret into an independent public company in August 2021 and changed its name to Bath & Body Works.

The Columbus, Ohio-based company will report second-quarter earnings on Aug. 17.

Distressed returns

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns were soft on Thursday at minus 0.23%.

One-day returns came to 0.04% on Wednesday, minus 0.29% on Tuesday and 0.29% on Monday.

Month-to-date total returns declined to 1.6% from 1.84% on Wednesday, 1.8% on Tuesday and 2.1% at the start of the week.

Year-to-date total returns widened to minus 21.39% on Thursday from minus 21.2% on Wednesday, minus 21.23% on Tuesday and minus 21% on Monday.

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