Community Health notes mixed amid corporate layoffs; Mallinckrodt issues slide on news of lawsuit

By James McCandless

San Antonio, April 12 – As the week nears its end, the distressed debt market saw another day of muted trading on Thursday, although news-driven names saw hikes in activity.

Community Health Systems, Inc. notes were mixed as the company is in the midst of laying off at least 70 corporate employees.

Mallinckrodt plc issues saw a decline as reports surfaced that a former employee is suing the company over the price of Acthar, its best-selling drug.

FirstEnergy Solutions Corp. paper declined as traders expressed doubt over whether the federal government will provide aid to the company’s troubled assets.

In distressed telecom, Frontier Communications Corp. notes were mixed while the company searches for buyers for certain assets. Intelsat SA issues were mixed. Northern Oil and Gas, Inc. notes climbed on another positive day for oil futures. Talen Energy Inc. issues fell.

Community Health layoffs

Franklin, Tenn.-based hospital operator Community Health Systems notes were mixed after reports confirmed that the company has been in the process of laying off at least 70 corporate employees over the past week.

This is the latest in a series of moves the company has taken to solve its debt problem. Over the past few weeks, the company has sold four hospitals. At the beginning of the year, the company warned shareholders that there would be potential asset sales to help control its debt.

The 7 1/8% notes due 2020 lost about ½ point to close at around 83¼ bid. The 6 7/8% notes due 2022, while actively traded, remained level at 58 bid.

Mallinckrodt sued

Elsewhere in the healthcare space, Britain-based drug maker Mallinckrodt saw its issues decline after reports confirmed that the company is being sued by a former employee who claims that the company continually raised the price of Acthar, one of its most popular drugs, without knowing what its contents were.

“These types of cases don’t sit well with investors,” a trader said. “Nobody likes a name that’s tangled up in court.”

The 4¾ % notes due 2023 shaved off about 2½ points to close at around 74 bid.

FirstEnergy down

FirstEnergy Solutions, a subsidiary of Akron, Ohio-based electricity producer FirstEnergy Corp., saw its paper decline, according to traders, as it awaits a decision from Secretary of Energy Rick Perry on whether to guarantee profitability to certain at-risk power plants to prevent them from shutting down (see related story elsewhere in this issue).

President Trump recently signaled his support for the measure while Perry said Monday that the move might not be the best solution to solving the country’s energy problems.

“I don’t think it’s going to happen,” a trader said. “It seems less likely as time goes on and that’s reflected in trading.”

The 6.05% paper due 2021 fell ½ point to close at 30 bid. The 6.8% bonds due 2039 traded down ¼ point to close at 29½ bid.

Volume names trade

Norwalk, Conn.-based wireline telecom name Frontier Communications notes were mixed as the search continues for buyers for certain assets.

The 7 5/8% notes due 2024 faced downward pressure in the day’s trading but remained level at about 63½ bid. The 10½% notes due 2022 went higher during the day but ended level at 87¾ bid. The 11% notes due 2025 edged up ¼ point to close at 77¾ bid.

Luxembourg-based satellite communications company Intelsat saw its Intelsat Jackson SA 5½% notes due 2023 drop ¼ point to close at 83 bid. The Intelsat (Luxembourg) SA 7 ¾% notes due 2021 rose about 1 point to close at around 63¾ bid.

Amid a slight gain for oil futures, Minnetonka, Minn.-based independent oil and gas producer Northern Oil and Gas’ 8% notes due 2020 jumped up about 1 point to close at 95 bid.

Allentown, Pa.-based independent power producer Talen Energy’s 6½% paper due 2025 lost about ½ point to close at around 72½ bid.

“We take our cues from the equity markets, so if this upswing sustains we may see more volume on our side,” a trader said. “Until then it’s going to be pretty quiet.”

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