Community Health notes rise again amid ratings downgrade; Frontier offers cash for several notes

By James McCandless

San Antonio, March 6 – Tuesday trading in the distressed debt market was described as an improvement over Monday, but activity was still relatively muted.

Notes in Community Health Systems, Inc. rose again despite a ratings downgrade precipitated by last week’s worrying Q4 report.

Frontier Communications Corp. issues continued their voluminous activity. The company announced cash tender offers of up to $1.6 billion for several series of notes.

J. C. Penney Co., Inc. saw its paper in high volume again after last week’s disappointing Q4 earnings report and layoffs at all levels of the company.

Another telecom name continuing to dominate volume was Intelsat SA. Oil futures were mixed on the day, spurring activity in distressed energy names California Resources Corp. and Northern Oil and Gas, Inc. Another distressed retail company that continues to add volume is Revlon, Inc.

Community Health downgraded

After last week’s disappointing Q4 report, where a net loss of $2 billion was reported along with chief executive officer Wayne Smith pointing toward potential hospital closures, a market source confirmed that Franklin, Tenn.-based hospital operator Community Health Systems notes saw another day of high activity. Today, Moody’s Investor Service downgraded the company’s corporate family rating and its probability of default rating (see related story elsewhere in this issue).

“They’re trying to become leaner,” a trader said. “But there is going to be a lot of bumps in that road.”

The 7 1/8% notes due 2020 rose about ½ point to close at just under 81½ bid. The 6 7/8% notes due 2022 traded up about ¾ point to close below 62½ bid.

Frontier announces cash offers

On the heels of a Q4 report and announcing the cancellation of its quarterly dividend, traders reported more activity for Norwalk, Conn.-based wireline telecom name Frontier Communications. The company announced Tuesday that it would be offering cash tender offers of up to $1.2 billion for several series of notes (see related story elsewhere in this issue).

The 7 5/8% issues due 2024 rose about ½ point to close just below 61½ bid. The 10½% issues due 2022 jumped up 1 point to close at 85 bid. The 11% issues due 2025 fell about 1¼ points to close at 78¼ bid.

Mallinckrodt trades

Britain-based drug maker Mallinckrodt’s paper has become a staple of the distressed medical sector since the company completed the $1.2 billion acquisition of Rockville, Md.-based medical applications company Sucampo Pharmaceuticals.

The 4¾% paper due 2023 rose about ½ point to close at about 79½ bid.

Volume favorites trade

After potentially beneficial changes to the country’s 5G network were eluded to by FCC chairman Ajit Pai, notes in Luxembourg-based satellite communications company Intelsat continue to take up telecom space.

The Intelsat Jackson SA 5½% notes due 2023 edged up ¼ point to close at 84¼ bid. The 7¼% notes due 2020 traded up ½ point to close at 95 bid.

A mixed day for oil futures gave way to a mixed day in distressed energy names.

Los Angeles-based independent oil and gas producer California Resources saw its 6% issues due 2024 tick up about ¼ point to close above 61 bid. The 8% issues due 2022 shot up about 3¼ point to close near 80¼ bid.

While active, Minnetonka, Minn.-based independent oil and gas name Northern Oil and Gas’ 8% paper due 2020 remained level at 91 bid.

New York City-based cosmetics producer Revlon’s stretch of activity has continued since announcing the departure of CEO Fabian Garcia as the company seeks to reverse revenue losses.

The 5¾% notes due 2021 fell about 2¼ points to close at 78¾ bid. The 6¼% notes due 2024 lost 1 point to close at 67 bid.

“Today was a little better than yesterday, which isn’t saying much,” a trader said. “But if the trend continues and equity markets remain stable we could see a robust March.”

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