Community Health, Quorum Health among gainers on Obamacare shedding; Bonanza surges on Chapter 11 filing

By Colin Hanner

Chicago, Jan. 4 – Focus in the distressed arena was on healthcare and related sectors on Wednesday as a newly convened Republican-controlled Senate took concrete steps toward dismantling the Affordable Care Act, sending hospital groups and pharmaceuticals surging.

Among those, Community Health Systems, Inc. and Quorum Heath Corp. saw several-point gains, and pharmaceutical companies Valeant Pharmaceuticals International, Inc. and Concordia International Corp. followed suit.

“All the hospitals and all those guys were trending higher,” a trader said.

The sudden spike comes as Republican leaders pledge to repeal the Affordable Care Act – colloquially known as Obamacare – the first order of business in a Republican-controlled Congress and soon-to-be White House.

Outside of the political sphere, Bonanza Creek Energy, Inc. made a pre-package Chapter 11 filing on Wednesday, which sent its distressed securities flying.

Other exploration and production companies followed the upward trend, though moves in Denbury Resources Corp., California Resources Corp. and MEG Energy Corp. were largely due to the improving price of oil futures.

Healthcare off to the races

On Wednesday, the first concrete move toward repealing Obamacare took place on the floor of the Senate, where Republican legislators pushed forward a budget bill that could effectively diminish public spending in health care.

The health care law has long been a target for Republicans, and president-elect Donald Trump voiced a repeal as part of his platform while running for president.

Trump took to social media during the market session, tweeting that the Affordable Care Act was Democrats’ “failed ObamaCare disaster” and will “fall of its own weight.”

The market was swift to react to the timeline put into play, and hospital groups became one of the prime beneficiaries of the day.

A trader said Community Health’s 6 7/8% notes due 2022 were up “almost 3” points to 72¾, and its 7 1/8% notes due 2020 were up 1¼ points to 78.

Following with a 1¼ point increase of its own were the company’s 8% notes due 2019, which settled at a 74¾ handle after trading as high as 76, the trader said.

Quorum Health’s 11 5/8% notes due 2023 traded as high as 89, up around “3 or 4 points” since its last trade, which a trader said had last traded before the new year.

Another trader said the securities were up 1 point to 89 1/8.

Kindred Healthcare Inc.’s 6 3/8% notes due 2022 were up 1¾ points to 89¾.

In pharmaceuticals, Concordia International’s 9½% notes due 2022 were up ½ point to 36, a trader said.

Steeper gains were seen in the 7% notes due 2015, which were up 1 point to 33, followed by the 7% notes due 2023, which were up 2¼ points to 32¾, the trader said.

Similar upticks were seen in Valeant Pharmaceuticals’ 5 5/8% notes due 2021, which were up 1¼ points to 79 ¾.

The Canadian pharmaceutical company’s 7¼% notes due 2022 were up 2 points to 84¾, and mirroring those gains were the 7½% notes due 2021, which settled at an 87¼ handle.

Rounding out Valeant were its 5 3/8% notes due 2020, which were up 1½ points to 87.

Thames, England-based Mallinckrodt Pharmaceuticals’ 4¾% notes due 2023 were up 5/8 point to 87¼, a trader said.

Bonanza goes bonkers

After announcing it had made a pre-packaged Chapter 11 bankruptcy filing on Wednesday, Bonanza Creek Energy’s distressed securities surged, with one trader calling them “the most notable” bond of the day.

The 5¾% notes due 2023 were up 11 points to 88¾, a trader said, though the securities traded as high as 90 during intraday trading.

And with an 11¼-point upswing, the company’s 6¾% notes due 2021 finished at 88½ on the session, a market source said.

According to a company news release, the restructuring support agreement and pre-packaged plan of reorganization provide for a substantial deleveraging transaction under which Bonanza Creek will transform its balance sheet by equitizing $867 million of its existing unsecured bond obligations and substantially bolster its liquidity position through a $200 million rights offering for new equity.

The rights offering will be backstopped by some of the unsecured noteholders.

E&P on the up-and-up

After retreating in the afternoon session on Tuesday, oil futures shot back up to positive levels bringing some distressed names along.

West Texas Intermediate crude was up $1.02, or 1.95%, to $53.35, while Brent crude was up $1.02, or 1.84%, to $56.49.

In distressed land, California Resources’ 8% notes due 2022 were up ½ point to 91, a trader said. A market source said the same notes were up 1 point to 90½.

CGG SA followed with a similar gain in its 6½% notes due 2021, which finished with a 49 handle.

Plano, Tex.-based Denbury Resources’ 6 3/8% notes due 2021 were up 2 points to 93½.

MEG Energy Corp.’s 7% notes due 2024 were up 1 point to 93, and Linn Energy, LLC’s 7¾% notes due 2021 were up 1 point to 44¾.

Distressed brief

Intelsat Luxembourg Holdings SA’s 7¾% notes due 2021 were up 1½ points to 35, a trader said, while a market source saw the notes going out the door with a 35¼ handle.

Technology company Avaya Inc.’s 7% notes due 2019 were down ½ point to 87¾, a trader said.

Tween retailer Claire’s Stores Inc.’s 9% notes due 2019 were up 1 to 52.

And rounding out the distressed activity were iHeartCommunications, Inc.’s 9% notes due 2022, up 1 point to 73¼, and its 11¼% notes due 2021, which were up ½ point to 77¼.

Caroline Salls contributed to this review.

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