Ultra Petroleum jumps post-earnings; Valeant debt in retreat; Quorum Health bonds drop

By Stephanie N. Rotondo

Seattle, Aug. 11 – The distressed debt market experienced some serious moves – both up and down – in Thursday trading.

Ultra Petroleum Corp., for instance, jumped 7 to 8 points after the company reported decent earnings.

A more than 4% gain in domestic crude oil prices could have also been playing a role. The pop was attributed to comments made by Saudi Arabia’s energy minister on possible actions OPEC members and non-OPEC producers would discuss at an informal meeting planned in September.

Also in the energy arena, EP Energy LLC’s 9 3/8% notes due 2020 rose 5 points to 67¾, a trader reported. The Houston-based oil and gas company launched a debt exchange on its term loans on Thursday.

Meanwhile, Valeant Pharmaceuticals International Inc.’s paper was drifting lower as the company came under “more scrutiny,” a trader said.

The U.S. Justice Department announced that its investigation into Valeant and its previously troublesome relationship with Philidor Rx Services could lead to criminal charges.

That wasn’t the only painful event in the health care sector: Quorum Health Corp. reported “dreadful numbers,” a trader said, which pushed its debt down as much as 15 points on the day.

However, the bonds did recoup a couple points, ending off only 10 to 12 points.

Ultra bonds better

Ultra Petroleum’s bonds were “up smartly” after it reported earnings, a trader said Thursday.

The trader saw the 5¾% notes due 2018 rising 7 points to 84¾. The 6 1/8% notes due 2024 gained almost 7 points, he said, to close at 83¾.

Another trader said the debt was up 7 to 8 points, with the 5¾% notes “around 85” and the 6 1/8% notes in an 83 to 84 ZIP code.

For the second quarter, Ultra Petroleum posted a profit of $14 million, or 9 cents per share.

On an adjusted basis, EPS was 25 cents per share.

Revenue was $146.6 million.

Valeant loses ground

Valeant Pharmaceuticals’ debt was among the day’s losers, though one trader was surprised the bonds hadn’t dropped lower.

The bonds – which had run up earlier in the week after the company reported earnings and reaffirmed its yearly guidance – declined 1 to 2 points after the Justice Department said it was looking into whether or not Valeant defrauded insurers by not being forthcoming about its relationship with mail-order pharmacy Philidor.

A trader said the 6 1/8% notes due 2025 dipped “almost 2 points” to 86, while the 5 7/8% notes due 2023 slid a point to 87.

Another trader saw the 6 1/8% notes falling 1½ points to “around 86.”

The market learned of the federal probe in October 2015. Since then, the Canadian drugmaker has been beset by even more troubles, including issues with its accounting practices.

On Thursday, a report from the Justice Department was released that indicated the investigation into the relationship with Philidor could result in criminal charges.

Valeant said in its earnings release this week that it had been cooperating with the investigation.

Quorum’s quandary

Quorum Health’s 11 5/8% notes due 2023 took it on the chin on Thursday, as the Brentwood, Tenn.-based medical services provider announced its second-quarter results.

The company – which was spun-off from Community Health Systems Inc. on April 29 – also updated its yearly guidance.

A trader said the bonds ended off 10 points at 88½. He noted that the paper had been down as much as 15 points earlier in the session.

Another trader called the issue off 10 to 12 points on the day.

“Yikes,” he said.

Net loss was $245.1 million, or $8.63 a share. Net operating revenues were $529.7 million.

The loss included impairment charges of $250.4 million.

The company also said that it was looking to pare down its debt profile and possibly sell off underperforming assets.

Some asset sales could be wrapped up in the fourth quarter, the company said in its earnings release.

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