First Republic Bank notes, equity skid; Bausch Health moves up; Community Health gains

By Cristal Cody

Tupelo, Miss., April 25 – First Republic Bank’s paper sank about 14 points to 15 points in strong trading activity in the distressed market on Tuesday, sources reported.

First Republic Bank’s stock also plunged 49.37% in the session after the bank posted first-quarter losses as well as weaker deposits.

The bank reported Monday that income fell 32.9% and deposits dropped 35.5% as depositors fled in the wake of the collapse of Silicon Valley Bank and other banks in March.

“Of course, First Republic’s sudden hemorrhaging of deposits mostly reflected customer concerns about the bank’s stability,” a Confluence Investment Management note on Tuesday said. “Nevertheless, the firm said deposits have been continuing to drift lower this month, suggesting that customers continue to look for higher returns in mutual funds, Treasury bills, and the like.”

Moody’s Investors Service dropped the bank’s preferred stock non-cumulative ratings on Friday but left the other ratings unaffected. First Republic said April 7 that it will suspend the quarterly cash dividend on each series of non-cumulative perpetual preferred stock.

Banks took a heavy round of negative rating actions on Friday from Moody’s, which downgraded issuers including Western Alliance Bancorp, Zions Bancorp NA and Comerica Inc. and changed outlooks to negative from stable for banks such as KeyCorp, Old National Bancorp and Fulton Financial Corp.

Stock faltered in the wave of earnings reports on Tuesday.

The S&P 500 index closed down 1.58%.

The iShares iBoxx High Yield Corporate Bond ETF fell 12 cents, or 0.16%, to $75.08.

Volatility climbed. The CBOE Volatility index increased 12.14% to 18.94 by the close.

Distressed paper in the health care spaces got a lift on Tuesday, sources said.

Bausch Health Cos. Inc.’s 8½% notes due 2027 were up 2 points by the close.

Community Health Systems Inc.’s 6 7/8% senior secured notes due 2029 (Caa2/CCC) climbed nearly 2½ points.

First Republic declines

First Republic Bank’s paper sank about 14 points to 15 points in strong trading supply on Tuesday, sources reported.

The 4 3/8% subordinated notes due 2046 (B2/B-) sank 15 points to 34 bid on $10 million of secondary volume.

First Republic Bank’s 4 5/8% subordinated notes due 2047 (B2/B-) slid 14 points to 39 bid on $4.5 million of trading.

The bank’s stock sank 49.37% on Tuesday to $8.10 on more than 187 million shares trading. Average volume was 37.28 million shares.

The San Francisco-based bank, cut to junk ratings in March, on Monday reported first-quarter earnings per share fell 38.5% to $1.23 per share from $2 a share a year ago. Deposits declined 35.5% to $104.47 billion in the quarter year over year.

On March 16, 11 major banks announced they would make $30 billion of deposits into First Republic to help shore up the bank.

Bausch improves

Bausch Health Americas, Inc.’s 8½% senior secured notes due 2027 (Ca/CCC-/CC) were up 2 points at 52¾ bid by the close, according to a market source.

Bausch will release first-quarter financial results on May 4.

The Laval, Quebec-based pharmaceutical company’s stock was down 5.82% at $7.12 on Tuesday.

Community Health better

Community Health’s notes gained about 2 points in active secondary trading over the session, market sources said.

The company’s 6 7/8% senior secured notes due 2029 (Caa2/CCC-) climbed nearly 2½ points to 72½ bid on $5.5 million of trading on Tuesday.

The 6 1/8% senior secured notes due 2030 (Caa2/CCC-) also rose about 2 points to 70½ bid on $3.8 million of volume.

The Franklin, Tenn.-based operator of acute care and outpatient facilities will report first-quarter earnings results on May 1.

Community Health’s stock was off 0.34% at $5.91.

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index started the week higher with one-day returns at 0.43% on Monday.

Returns were 0.32% on Friday and minus 0.06% in the same session a week ago.

Month-to-date returns climbed to 2.3% on Monday, compared to 1.86% on Friday and 1.61% in the week ago session.

Year-to-date total returns increased Monday to 6.92% versus 6.46% on Friday and 6.2% the same day a week ago.

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