Intelsat big moves from Friday pick back up; Community Health, Valeant down on health care bill

By Colin Hanner

Chicago, March 7 – As traders awaited the slew of new issues in the high-yield market, activity in the distressed realm took a softer tone on Tuesday, traders said, though health care legislation and company-specific developments shifted movement for a few distressed companies.

“[There were] tons of new issues,” a trader said, adding that there was muted activity in the distressed arena as traders waited for deals to price.

“The most active names volume-wise were new issues,” another trader said.

By and large the most active issues of the day were those of Intelsat SA and its subsidiaries, some of which were up several points on the day.

Franklin, Tenn.-based hospital group Community Health Systems, Inc. announced a public offering of $1.75 billion of senior secured notes due 2023, the proceeds of which will be sued to repay certain term loans, as well as the company’s 5 1/8% senior secured notes due 2018.

The hospital group was also feeling the effects of recently proposed heath care legislation, the American Care Act, especially on its equity front.

On a similar front, Valent Pharmaceuticals International, Inc. was down several points though, generally, the health care legislation was less direct at pharmaceutical makers than was a tweet by President Trump early Tuesday morning directed at drug makers.

And several one-off names that trade regularly – Avaya Inc., iHeartCommunications, Inc. and California Resources Corp. – traded tight on a session with activity similar to that seen on Monday.

Intel, in some cases, up big

After a relatively mild Monday following an active last week, Intelsat returned to the limelight, especially in Intelsat Luxembourg Holdings SA’s bonds, which were up substantially on the session.

The 7¾% notes due 2021 were up 5 points to 62 1/8, a trader said, while the similarly held 8 1/8% notes due 2023 were up 6 points to 62¼.

“It’s the lower-rated stuff that’s jumping,” a trader said.

Intelsat Connect Finance SA’s 12½% notes due 2022 were up 1 point to 90½.

And Intelsat Jackson Holdings SA’s 5½% notes due 2023 were up 1/8 point to 85¼, a market source said.

Though there were no apparent drivers of the movement, Intelsat did acquire an equity stake in Kymeta, a satellite technology company, a news release said. There were no details of the deal at press time.

Community Health down

At least one issue of Community Health Systems’ distressed notes was down following a string of events of Tuesday.

The hospital operator is planning a public offering of $1.75 billion of senior secured notes due 2023 to repay $1,023,000,000 principal of certain term loans, according to a press release.

Proceeds will also be used to purchase any and all of CHS/Community Health’s 5 1/8% senior secured notes due 2018 that are validly tendered and not validly withdrawn in the cash tender offer announced on March 2 and redeem all of the 2018 notes that are not purchased pursuant to the tender offer.

A night prior, the American Health Care Act – quickly labeled Trumpcare by many – was brought forward by House Republicans in the hopes of repealing and replacing the existent Affordable Care Act.

Perhaps affecting the distressed realm the most on Tuesday was the future of Medicaid, which, if the American Health Care Act were to pass, would continue to run as such until 2020, when funding would begin to curtail for the federal and state health care program.

Hospital groups – like Community Health – may be at risk of losing the patients who rely on Medicaid if the bill were to pass as currently written.

On the day, Community Health’s 6 1/8% notes due 2022 were down 1½ points to 86½, a trader said.

Community Health Systems stock was down 91 cents, or 9.28%, to $8.95.

Pharma falls

As the American Health Care Act came to the public on Tuesday, drug companies came under scrutiny from President Trump, who vowed before and after his election to lower prices of drugs for Americans.

“I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!” Trump wrote in a tweet on Tuesday morning.

That did not put pharmaceutical companies in a good place on Tuesday, especially Valeant Pharmaceuticals, whose 5 7/8% notes due 2023 were down 2 points to 78, a trader said.

A market source said the 7½% notes due 2021 were down 1¾ points to 91¾.

Valeant’s stock was down 70 cents, or 5.64%, to $11.71.

And fellow pharmaceutical company Concordia International Corp.’s 7% notes due 2023 were down 1 point to 35, a trader said.

Distressed market movers

Media company iHeartCommunications’ 9% notes due 2019 were down 1 point to 89 1/8, a trader said.

Santa Clara, Calif.-based telecommunications company Avaya’s 7% notes due 2019 were up 1/8 point to 79 1/8, a trader said.

Seeing similar movement in the opposite direction were California Resources’ 8% notes due 2022, which were down 1/8 point to 85.

Marine transportation services GulfMark Offshore, Inc.’s 6 3/8% notes due 2022 were down 2½ points to 55½, a trader said.

And offshore drilling company Pacific Drilling Co. was down 1 point in its 7¼% notes due 2017, though it only saw one trade on the day, a trader said.

Tali Rackner contributed to this review

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