Cano Health paper up in September; Community Health notes improve; Michaels weakens

By Cristal Cody

Tupelo, Miss., Sept. 19 – Distressed paper in the health care space went out mixed on Tuesday as the market widened further following two new bankruptcies.

Cano Health LLC’s 6¼% senior notes due 2028 (C/C) were active in the secondary market over the day, but the issue has made significant gains so far in September, a source said.

The 6¼% senior notes due 2028 (C/C) were last seen in the prior week with a handle in the low 30s, up more than 10 points from August.

The Medicare Advantage-focused primary care service provider “has insufficient liquidity to cover operations for the next six to 12 months amid deterioration in operational performance,” Fitch Ratings said in a report on Friday.

Meanwhile, Community Health Systems Inc.’s 6 1/8% secured notes due 2030 (Caa2/CCC-) found good reception and picked up ¾ point on Tuesday.

The market saw new bankruptcy reports from digital health company UpHealth, Inc. subsidiary UpHealth Holdings, Inc., which filed Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

Also, American Physician Partners, LLC filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the District of Delaware to implement a pre-packaged Chapter 11 plan of liquidation.

Other news in the space included Moody's Investors Service’s downgrade of Carestream Dental Technology, Inc.'s ratings to Caa2 from B3.

In the general market on Tuesday, stocks were under pressure with indices lower on the day.

The S&P 500 index fell 0.22%.

The iShares iBoxx High Yield Corporate Bond ETF gave back 23 cents, or 0.31%, to $74.46.

The CBOE Volatility index edged up 0.79% to 14.11.

Looking at distressed retailers, Michaels Cos., Inc.’s 7 7/8% senior notes due 2029 (Caa2/CCC) issued by Magic MergeCo. Inc. were on the defensive on Tuesday in strong trading action.

The notes sank around 3 points during the session, sources reported.

Cano Health quiet

Cano Health’s 6¼% senior notes due 2028 (C/C) stayed quiet on Tuesday in secondary trading but remained higher so far in September, a source said.

The bonds were last seen trading on Thursday at 34½ bid.

The issue ended August at 23 bid but traded as low as a 13 handle during the month.

Cano Health reported steep second-quarter losses on Aug. 10 and announced it is pursuing and evaluating interest in a sale of the company or its assets.

The Miami-based primary care provider also withdrew its fiscal year 2023 guidance first provided on May 9.

Cano Health, Inc.’s stock (NYSE: CANO) dropped 15.69% to 26 cents on Tuesday. Shares have traded from 22 cents to $9.75 over the past 52 weeks.

Community Health up

Community Health’s 6 1/8% secured notes due 2030 (Caa2/CCC-) traded ¾ point better on Tuesday at 56 bid, a market source said.

Shares (Nasdaq: CYH) in the Franklin, Tenn.-based operator of acute care and outpatient facilities fell 3.52% to $3.01 in thin trading over the session.

Michaels softens

Elsewhere, Michaels’ 7 7/8% senior notes due 2029 (Caa2/CCC) slid 2 7/8 points to 68¾ bid by the close on Tuesday after trading as high as 73½ bid early in the session, a source said.

By late afternoon, the notes were down 3¼ points at 69 bid, another source said.

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

Distressed index gains

The S&P U.S. High Yield Corporate Distressed Bond index posted one-day total returns of 0.05% on Monday, up from zero on Friday.

Month-to-date total returns improved to 1.8% as the week kicked off, up from 1¾% going into the weekend.

Year-to-date distressed total returns rose to 19.23% in the prior session from 19.17% on Friday.

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