Home Point Capital steadies; Embarq paper posts more losses; Envision Healthcare quiet

By Cristal Cody

Tupelo, Miss., Sept. 21 – Home Point Capital Inc.’s notes steadied on Wednesday in light secondary action totaling more than $4 million over the day.

The 5% senior notes due 2026 (Caa1//B-) were flat following Tuesday’s drop of about ¾ point on more than $17 million of volume after the company reported a much-reduced contract with UBS AG.

Meanwhile, paper from Embarq Corp. continued to decline a third consecutive session.

Embarq’s 7.995% notes due 2036 (Caa2/BB/BB) went out down about 4 points.

The issue sank nearly 8½ points on Tuesday after giving back 6 points on Monday following a downgrade from Moody’s Investors Service.

Markets finished soft after the Federal Reserve raised the benchmark interest rate by another 75 basis points on Wednesday to raise the target range for the Federal Funds rate to 3% to 3¼%.

The Fed said it “anticipates that ongoing increases in the target range will be appropriate.”

Stock indices all were more than 1% lower. The S&P 500 index closed down 1.71%.

The iShares iBoxx High Yield Corporate Bond ETF fell 22 cents, or 0.3%, to $73.50.

The CBOE Volatility index edged up 3.06% to 27.99.

In distressed health care paper, Envision Healthcare Corp.’s 8¾% senior notes due 2026 (C/CC) were quiet on Wednesday after Moody’s cut the issuer and the notes.

Moody’s said that it considers “Envision filing for bankruptcy or undertaking a major restructuring to be highly likely.”

The health care sector accounted for three defaults in August, according to a separate report from Moody’s on Wednesday.

The number of defaults jumped in August to 11 rated corporate issuers, up from five in July, while the year-to-date total through August hit 59, outpacing the 55 defaults for all of 2021, according to the note.

The global speculative-grade corporate default rate rose to 2.3% for the trailing 12 months ended in August from 2.2% a month earlier, Moody’s said.

S&P Global Ratings said in a note on Wednesday that the second quarter saw 21 rated corporate defaults globally, up from 13 defaults in the first quarter and 20 defaults in the same quarter last year.

Home Point flat

Home Point Capital’s 5% senior notes due 2026 (Caa1//B-) went out flat at 67½ bid after trading as high as 68 bid in secondary action totaling more than $4 million over the day, sources said.

The notes saw quieter trading on Wednesday after dropping about ¾ point on Tuesday on more than $17 million of volume.

Home Point Capital said in an 8-K filing with the Securities and Exchange Commission on Tuesday that on Sept. 16 Home Point Financial Corp. and UBS amended its Oct. 28, 2015 master repurchase agreement for mortgage loans.

The amendment decreased the maximum purchase price provided for under the existing master repurchase agreement to $200 million from $500 million and extended the termination date of the repurchase agreement to Sept. 15, 2023, among other changes.

The company has reportedly laid off hundreds of employees in the past month, as well as lowered mortgage prices for low-income borrowers.

Home Point Capital in August reported second-quarter total revenue dropped to $70 million from $84.37 million a year ago, while losses improved to $44.42 million from $73.21 million in the same quarter last year.

The Ann Arbor, Mich.-based company is the parent of wholesale mortgage lender Homepoint.

Embarq extends declines

Embarq’s 7.995% notes due 2036 (Caa2/BB/BB) went out Wednesday down about 4 points at 57 bid after trading as high as 59 bid earlier in the session, a source said.

The Overland Park, Kan.-based telecommunications company’s issue gave back nearly 8½ points on Tuesday and 6 points on Monday.

Moody’s lowered the notes on Monday to Caa2 from Ba2.

Embarq will become a subsidiary of Connect Holding II LLC, doing business as Brightspeed, in connection with its acquisition from Lumen Technologies, Inc. by Apollo Global Management, Inc. funds.

Envision trading slows

Envision Healthcare’s 8¾% senior notes due 2026 (C/CC) were last seen active in secondary trading on Monday at the 34¼ bid area, up ¾ point from Friday, a source said.

The bonds saw thin trading activity in August and ended the month mostly flat with a 33 handle.

Moody’s said Wednesday it dropped Envision to C from Caa3 and the senior notes to C from Ca following a series of transactions that included restructuring Envision’s senior secured credit facilities and obtaining a new revolving credit facility in July, as well as other debt through subsidiary AmSurg, LLC in April.

The transactions are considered a distressed exchange as the loans were exchanged at below par, Moody’s said.

A bankruptcy filing or major restructuring from the company is “highly likely,” Moody’s said.

Envision’s second major restructuring on Aug. 5 included a new money first-out term loan, new second-out term loan a new third-out term loan.

The Nashville-based health care company and hospital-based physician group conducted a $2.6 billion distressed exchange in May.

Distressed index dips

S&P U.S. High Yield Corporate Distressed Bond index one-day returns fell on Tuesday to minus 0.19% from 0.44% on Monday.

Month-to-date total returns dropped to minus 1.81% ahead of the Fed’s meeting from minus 1.62% at the week’s start.

Year-to-date total returns were lower on Tuesday at minus 22.53% versus minus 22.38% on Monday.

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