Sabra notes decline; Toledo Hospital softens; Bausch Health paper perks up; Michaels off

By Cristal Cody

Tupelo, Miss., Sept. 20 – The distress in the health care space has spread to some high-grade issuers, including health care real estate investment trust Sabra Health Care LP’s paper that was on the decline on Tuesday.

Sabra’s 3.2% senior notes due 2031 (Ba1/BBB-/BBB-) fell more than ¾ point on Tuesday and has declined about 3½ points since August.

Toledo Hospital’s 5.325% senior secured notes due 2028 (Ba2/BB) traded over 1 point lower over the day.

In August, one-third of the 10 global corporate defaults during the month came from the U.S. health care sector, according to a S&P Global Ratings report on Monday.

Meanwhile, distressed pharmaceutical paper saw some gains in mostly light secondary trading on Tuesday.

Bausch Health Cos. Inc.’s notes perked up in mostly light trading.

Bausch’s 9¼% senior notes due 2026 (Caa3/CC/C) jumped 4 points on less than $1 million of secondary volume.

Market jitters kept the day’s tone weak ahead of the Federal Reserve’s widely expected rate hike on Wednesday.

Stock indices were down about 1%. The S&P 500 index closed off 1.13%.

The iShares iBoxx High Yield Corporate Bond ETF gave back 76 cents, or 1.02%, to $73.72.

Measured volatility also was moving higher as the CBOE Volatility index rose 5.59% by the close to 27.20.

Oil prices dropped by the end of the session.

West Texas Intermediate crude oil benchmark futures for October deliveries settled down $1.28 to $84.45 a barrel.

The retail space also has a few distressed names with one traded heavily Tuesday, a source said.

Michaels Cos., Inc. 7 7/8% senior notes due 2029 (Caa1/CCC+) dropped 3 points on more than $16 million of volume.

Sabra notes lower

Sabra Health Care’s 3.2% senior notes due 2031 (Ba1/BBB-/BBB-) fell more than ¾ point on Tuesday to the 76 bid area after ending Monday mostly flat, a source said.

The issue has declined about 3½ points since August.

Sabra is an Irvine, Calif.-based health care REIT that invests in skilled nursing, senior housing and behavioral health facilities in the United States and Canada.

Toledo Hospital softens

Toledo Hospital’s 5.325% senior secured notes due 2028 (Ba2/BB) went out Tuesday lower at the 71¾ bid area in thin activity, a market source said.

The notes were last seen trading in the prior week in the 73 bid range.

Toledo Hospital’s issue was trading more than 5 points stronger so far in September after sliding over 30 points in August. The issue ended July with a 97 handle.

Moody’s Investors Service downgraded the issuer to junk on Thursday.

S&P Global Ratings dropped the Ohio-based health care company, doing business as ProMedica Health System, Inc., to junk in August.

Bausch paper higher

Bausch’s paper was moving higher on Tuesday in fairly thin trading, sources said.

The company’s 9¼% senior notes due 2026 (Caa3/CC/C) jumped 4 points to 60 bid on less than $1 million of secondary volume.

The 7% senior notes due 2028 Caa3/CC/C) gained 7/8 point to 37¾ bid on Tuesday, while the 5¼% senior notes due 2031 (Caa3/CC/C) were trading over 2 points better at 39 bid in light action.

Bausch last week announced approximately $5.58 billion of notes had been validly tendered in its offer to exchange existing senior notes for up to $4 billion of new secured notes.

The Laval, Quebec-based pharmaceutical company plans to spin off unit Bausch + Lomb.

Michaels notes drop

In the retail space, Michaels’ 7 7/8% senior notes due 2029 (Caa1/CCC+) traded down 3 points to 63 5/8 bid in strong secondary action on Tuesday, a market source said.

Volume totaled more than $16 million.

The Irving, Tex.-based arts and crafts retailer was taken private by funds managed by Apollo Global Management, Inc. affiliates in 2021.

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index one-day returns improved on Monday to 0.44% from minus 0.9% on Friday.

Month-to-date total returns were better at minus 1.62% at the week’s start versus minus 2.06% ahead of the weekend.

Year-to-date total returns improved on Monday to minus 22.38% from minus 22.72% on Friday.

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