Toys 2018s retreat from Tuesday peaks; hospitals mostly lower; Bombardier steady; SuperValu gyrates

By Paul Deckelman

New York, Oct. 18 – Traders saw a relatively quiet session in the bonds of distressed or otherwise underperforming companies on Wednesday, in line with a lower-volatility session in the larger high-yield market.

There were no multi-point jumps in active dealings on several names, as had been the case on Tuesday.

Bankrupt retailer Toys ‘R’ Us Inc.’s 2018 notes – which had zoomed by some 15 points on Tuesday – were seen having given at least some of those gains back on Wednesday, though in far quieter trading.

Traders said that hospital names such as Community Health Systems, Inc. and Tenet Healthcare Corp., up over the past two days after having been battered on Friday, were mostly back on the downside on Wednesday. But HCA Inc. seemed to be holding its own.

The traders saw underperforming Canadian aircraft manufacturer Bombardier, Inc.’s bonds – which had jumped by around six points across the board in very active trading Tuesday – largely staying around their previous closing levels, again on far less volume.

In the recently turbulent food stores sector, SuperValu, Inc.’s notes were gyrating around – first moving higher but then ending the day lower, as the supermarket operator and grocery wholesaler announced fiscal second-quarter results and an acquisition the wholesale area.

Toys trades off

Tuesday’s big winner – the Toys ‘R’ Us 7 3/8% notes due 2018 – were seen lower on Wednesday.

Those bonds had jumped by 15 points on Tuesday to the 43 bid level, helped by news reports indicating that the bankrupt Wayne, N.J.-based specialty retailer of toys games and children’s products was looking to raise capital, possibly by an initial public offering for its growing Asian business, which is not affected by the Chapter 11 reorganization.

But on Wednesday “Toys backed off,” a trader said, seeing the notes down 2½ points on the day, ending at 40½ bid.

Only about $4 million traded on a round-lot basis Wednesday, versus the more than $26 million changing hands on Tuesday.

There were also smaller odd-lot trades in the upper 30s, a trader said.

But another market source said considering the size of Tuesday’s bounce, “they didn’t finish off by too much” in ending at 40½.

“It was just a little bit of retrenchment.”

Hospitals head lower

Traders said that most hospital names were off on Wednesday, some in active trading, breaking a two-session winning streak during which the healthcare names had headed higher following some rocky trading at the tail end of last week.

The sector names have been lately gyrating amid the latest Washington developments on the nation’s Affordable Care Act, popularly known as Obamacare. They fell last week as the Trump administration issued several executive orders forbidding certain reimbursements to insurance companies, while allowing the formation of new groups for the purpose of buying healthcare insurance at presumably better rates.

News Monday and Tuesday of a possible bipartisan compromise on an Obamacare fix, which had helped the hospital names, seemed to fizzle on Wednesday, sending the bonds back down.

“The hospital names were off, with all of this Washington back-and-forth pulling,” one observer declared.

A trader saw Community Health Systems’ 6 7/8% notes due 2022 “off a bit, down ½ to 1 point,” closing around 75½ bid. A second trader called them half-point losers at 75½ bid, with over $29 million traded.

The source saw the Franklin, Tenn.-based healthcare company’s 7 1/8% notes due 2020 doing even worse, dropping down a deuce on the day to end at 87 bid, on over $31 million of volume.

Its 8% notes due 2019 lost 5/8 point, going out at 97¼ bid, with around $12 million having traded.

Dallas-based hospital operator Tent’s 6¾% notes due 2023 ended down 1 point on the day at 94 bid, with over $23 million traded, while its 8 1/8% notes due 2022 “were actually up on the day,” one of the traders said, located the issue at 101¼ bid, up ¼ point on the day, on volume of about $20 million.

And Nashville-based healthcare industry giant HCA’s 5 7/8% notes due 2026 were also bucking the generally negative trend, seen up 9/32 point on the day at 106 1/16 bid, with over $17 million having traded.

Bombardier holds steady

A trader said that Bombardier Inc.’s bonds “were still knocking around,” but he said that they were “not much changed” from where they had finished on Tuesday, when the Montreal-based aircraft manufacturers’ paper had jumped around 5 or 6 points across the board on the news that European aerospace giant Airbus will take a 50.1% stake in Bombardier’s C-Series 100-to-150-seat aircraft business.

He saw the company’s 6% notes due 2022 unchanged at 101½, and its 7½% notes due 2025 perhaps off 1/8 point at 106¾ bid.

“They held onto their gains,” he said, though only one, the 7½s , was “very active – there were scant few trades in the rest.”

Another market source saw the 7½s actually up slightly, at 107¼ bid, with about $10 million having traded.

SuperValu volatility

Traders saw SuperValu’s 7¾% notes due 2022 gyrating around, with the bonds having jumped by 2 points early in the session, to highs of around 97 ½ bid – only to give up those early gains and then some.

“They had been off a little yesterday [Tuesday], ahead of the company’s release of its fiscal second-quarter results,” a trader said.

“Then they rebounded, to around 96½ or 97.”

But by the end of the day, he said, the bonds had fallen back to around 94 bid, which he called down 1 point from Tuesday’s close and down more than 2½ points from their intraday high on Wednesday.

Volume was around $10 million.

The company’s 6¾% notes due 2021 “were at 97 right out of the gate,” another trader said, “but then down 1½ or 2 points or more after that.”

Another trader saw them ultimately ending around the 95 level, “pretty much flat on the day, but not on huge volume.”

Eden Prairie, Minn.-based SuperValu, a retail supermarket operator and wholesale grocery supplier to other supermarket companies, reported quarterly earnings – but while the numbers beat expectations, same-store-sales slid by 3.5% from year-ago levels, indicating continued weakness in the company’s retail operations.

That was also blamed for an 11% plunge in the company’s New York Stock Exchange-traded shares Wednesday.

SuperValu also announced that it had agreed to acquire Associated Grocers of Florida, Inc., a cooperative supplier of groceries to independent retailers in that state, for $180 million, further enhancing its wholesale operations component.

© 2015 Prospect News.
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