Community Health notes slide as offering in works; PetSmart mixed on lawsuit against loan agent

By James McCandless

San Antonio, June 27 – Activity in the distressed debt market was driven by names with news surrounding them on Wednesday, while the rest of the market remained muted.

Community Health Systems, Inc. notes declined as the company prepares an offering of $1.027 billion of senior secured notes due 2024.

PetSmart, Inc. issues were mixed as the company files a lawsuit against loan agent Citigroup for not releasing liens tied to a recent contentious asset transfer concerning internet arm Chewy.com.

Frontier Communications Corp. paper declined. Last Thursday, the company announced the resignation of its chief financial officer.

Intelsat SA notes fell. The company announced recently that it would buy back its 7¾% notes due 2021.

PHI, Inc.’s issues rose. The company recently announced a cash tender offer for its 5¼% notes due 2019.

Hexion, Inc. paper continued to see above average volume despite no news driving it.

Community Health down

Franklin, Tenn.-based hospital operator Community Health Systems notes declined, traders confirmed, after the company announced that subsidiary CHS/Community Health Systems, Inc. plans to make an offering of $1.027 billion of senior secured notes due 2024 (see related stories elsewhere in this issue).

In the latest in a series of debt reduction moves, the company announced Tuesday that it had entered into a definitive agreement to sell one of its Oklahoma hospitals to a subsidiary of Oklahoma-city based hospital facilities operator INTEGRIS Health. Expecting the sale to close in Q3 2018, this is the 10th asset sale that the company has taken part of this year.

The 7 1/8% notes due 2020 lost about 1 point to close at around 91 bid. The 6 7/8% notes due 2022 shaved off about ½ point to close at around 53½ bid.

On Tuesday, the 7 1/8% notes rose about 6½ points and the 6 7/8% notes lost about ¾ point.

PetSmart mixed

Phoenix-based pet supplies retailer PetSmart issues were mixed, market sources confirmed, after the company filed a lawsuit against loan agent Citigroup for allegedly not cooperating with a recent equity transfer of 36.5% of e-commerce segment Chewy.com as it is contractually obligated to do. PetSmart claims that Citigroup failed to release security interests as part of the credit agreement.

“This doesn’t inspire a lot of confidence,” a trader said. “Also, Citi tried to wash their hands of this a while ago. But there hasn’t been anyone to take over that loan agent role yet so here they are.”

The 5 7/8% notes due 2025 lost about ¼ point to close at around 76¼ bid. The 8 7/8% notes due 2025 picked up about ¼ point to close at around 64¼ bid.

On Tuesday, the 5 7/8% notes were level and the 8 7/8% notes lost ¼ point.

Frontier slides

Norwalk, Conn.-based wireline name Frontier Communications paper fell, traders confirmed. Last week, the company announced the coming departure of CFO Perley McBride.

Recently, an auction for the company’s Florida assets did not generate a satisfactory bid.

The 7 5/8% paper due 2024 lost about ¼ point to close at around 70½ bid. The 10½% paper due 2022 fell about 2 points to close at around 89½ bid. The 11% paper due 2025 shaved off about ½ point to close at around 81 bid.

On Tuesday, the 7 5/8% paper was level, the 10½% paper was level and the 11% paper fell ½ point.

Volume names trade

Luxembourg-based satellite communications company Intelsat notes saw more activity in the distressed telecom space. Recently, the company announced that it would buy back its Intelsat (Luxembourg) SA 7¾% senior notes due 2021.

The 7¾% notes due 2021 lost about ¼ point to close at 92 bid. The 8 1/8% notes due 2023 dropped about ¼ point to close at around 80½ bid.

On Tuesday, the 7¾% notes rose about 1¼ points and the 8 1/8% notes gained about 4¾ points.

Lafayette, La.-based offshore energy transportation name PHI’s issues improved. Last Friday, the company announced a cash tender offer to purchase any and all of its $500 million in outstanding 5¼% senior notes due 2019.

The 5¼% notes due 2019 gained about ¼ point to close at around 97¾ bid.

Columbus, Ohio-based chemicals producer Hexion paper traded in high volume.

The 6 5/8% paper due 2020 lost 1 point to close at 94 bid. The 9% notes due 2020 fell about ¼ point to close at 85¼ bid.

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