Community Health gains continue; energy issues easier despite crude rise; iHeart paper lower

By Paul Deckelman

New York, Jan. 12 – Traders in distressed debt and the bonds and notes of otherwise underperforming companies and sectors saw a less busy day on Friday, in line with a fall off in volume in the overall larger high-yield bond market.

For a second straight session, hospital operator Community Health Systems Inc.’s bonds were firmer, extending the momentum generated on Thursday, then those bonds had moved up by multiple points, helped by a surge in the company’s shares after its biggest investor increased its equity holdings.

In the energy sphere, traders saw some profit-taking off recent gains, leading to slightly lower prices on such names as California Resources Corp., Noble Holding International Ltd., MEG Energy Corp. and Transocean Ltd.

Elsewhere, traders saw easier levels on iHeartCommunications paper.

Energy issues ease

Traders said that some of the oil and natural gas and energy drilling issues were also off from their recent highs.

“They traded off a little despite oil prices being better,” one trader said.

For example, he said that Los Angeles-based exploration and production company California Resources’ 8% second-lien senior secured notes due 2022 were trading around 87 3/8 on Friday, which he said was down about 1 point from that energy sector benchmark bond’s recent peak levels.

He allowed, though, that the Cal Res bonds “have had a great run” in the last few weeks, spurred on by higher crude prices.

He suggested that after those gains, “maybe there was some profit-taking today [Friday] in those energy names.”

Calgary, Alta.-based shale company MEG Energy’s 6 3/8% notes due 2023 were seen down 1 full point at 90 bid, a market source said.

Among the drillers, Noble Holding International’s 7¾% notes due 2024 were “another active name on the day,” seeing those bonds down ½ point on day at 94¾ bid.

Its sector peer Transocean’s 7% notes due 2028 fell a full 3½ points on Friday, ending at 100½ bid.

The retreat in those energy credits came despite a fifth consecutive advance in world crude oil prices on Friday, as they continue to trade at their highest levels since early 2015.

Key domestic grade West Texas Intermediate for February delivery rose by 50 cents per barrel in New York Mercantile Exchange dealings, settling at $64.30, while the main international grade, March-contract North Sea Brent crude, was up by 61 cents per barrel in London futures trading, ending at $69.87.

Community Heath climb continues

For a second straight session, traders said that Community Health Systems’ bonds traded higher, with a market source seeing the Franklin, Tenn.-based hospital operator’s 6 7/8% notes due 2022 up more than 2 points on the day at 66 bid, on top of the gains that it and the company’s other issues had mapped out on Wednesday. In that session the 6 7/8% notes had jumped nearly 4 points on the day.

The bonds firmed along with the company’s shares – which zoomed by 24% on Wednesday and which rose another 3% on Thursday on the news that Shanda Group, a Chinese investment company that is currently Community Health’s largest shareholder, said in a Securities and Exchange Commission filing that it had increased its already considerable stake, bringing its holding to 24% of the outstanding shares.

iHeart seen easier

A trader said that iHeartCommunications paper “opened a little lower on the day,” seeing the 9% notes due 2021 “knocked down to around a 71-handle – but it rebounded from its lows.”

He said the same was true of the San Antonio, Texas-based satellite radio broadcaster and outdoor advertising company’s 9% notes due 2019. He saw those bonds going home “wrapped around” a 74 to 75 bid level.

“So they were still down a little but rebounded by 1 point from the lows.”

He attributed the initial fall to investor scuttlebutt that the debt-laden company may seek to hire an adviser to help it deal with its obligations.

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