Community Health up after hospital sales; FirstEnergy Solutions issues rise on reports of federal aid

By James McCandless

San Antonio, June 1 – Activity in the distressed debt market was moderate on Friday, traders reported, as the short week came to an end.

Community Health Systems, Inc. notes rose as the company announced the completion of the sale of five hospitals.

FirstEnergy Solutions Corp. issues jumped amid reports that the federal government is considering providing assistance to at-risk power plants.

PetSmart, Inc. paper gained for a second day as the market continues to react to the company’s appointment of a new chief executive officer last week.

Intelsat SA notes declined. Recently, the company released a lagging Q1 report. Frontier Communications Corp. issues were mixed. The company is managing the fallout of a recent failed auction for its Florida assets. Mallinckrodt plc paper gained.

Community Health up

Franklin, Tenn.-based hospital operator Community Health Systems’ notes gained, traders confirmed, as the company announced the sale of five hospitals to three companies on Friday. Three of its Tennessee assets were sold to West Tennessee Healthcare, another Tennessee asset was sold to Rennova Health, Inc., and one Louisiana asset was sold to subsidiaries of Allegiance Health Management.

All transactions are effective June 1.

The sales are part of the company’s divestiture plan to combat its debt detailed in a January earnings call. The plan also includes corporate layoffs and refinancing.

The 7 1/8% notes due 2020 gained about ¾ point to close at 83 bid.

FirstEnergy Solutions jumps

FirstEnergy Solutions, a subsidiary of Akron, Ohio-based electricity producer FirstEnergy Corp., saw issues gain as reports confirmed the federal government is considering granting the company’s request to provide financial assistance to at-risk coal and nuclear power plants.

President Trump has signaled his support for the measure before, but Energy Secretary Rick Perry expressed reservations.

Barring federal intervention, the company intends to close three at-risk plants.

“It didn’t seem likely a month or two ago,” a trader said. “But not much is surprising anymore. It would be an unprecedented move.”

The 6.05% notes due 2021 gained about 3¼ points to close at 53¼ bid. The 6.8% bonds due 2039 traded up about 4½ points to close at 54½ bid. The 6.85% bonds due 2034 rose 2½ points to close at 52 bid.

PetSmart rises

Phoenix-based pet supplies retailer PetSmart’s paper traded up for a second day, market sources confirmed. The company announced the appointment of retail executive J.K. Symancyk as its new chief executive officer last Monday.

The new CEO is tasked with steering the company through increased competition, namely from Amazon.com, Inc., which has announced an in-house brand of dog food that will be made available to its Prime subscribers.

The 5 7/8% paper due 2025 gained about ½ point to close at around 69½ bid. The 8 7/8% paper rose about ¼ point to close at around 48 bid.

On Thursday, the 5 7/8% paper rose about ¼ point and the 8 7/8% paper gained about ¼ point.

Volume names trade

Luxembourg-based satellite communications company Intelsat’s notes traded down. A recent Q1 report showed a 56 cents per share loss, falling short of analyst estimates of 41 cents per share.

The Intelsat (Luxembourg) SA 7¾% notes due 2021 dropped ¾ point to close at 81¾ bid. The 8 1/8% notes due 2023 fell about 3¼ points to close at 75¾ bid.

Norwalk, Conn.-based wireline name Frontier Communications issues were mixed. The company is working to settle investor concerns after a failed auction of its Florida assets, which did not produce bids that it considered satisfactory. The auction is part of its efforts to reduce debt.

The 7 5/8% notes due 2024 traded up about ¾ points to close at around 68¼ bid. The 10½% notes due 2022 were level at around 90 bid. The 11% notes due 2025 gained about 2½ points to close at around 82½ bid.

Britain based drug maker Mallinckrodt saw its 4¾% paper due 2023 rise about ¾ point to close at around 81 bid.

“The week was pretty slow,” a trader said. “As we get back into the swing of things and the full effects of those tariffs make their way over to our markets, there should be more activity.”

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