Community Health on deck; Dean Foods, Weight Watchers drop, Frontier gains post-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 27 – While the high-yield primary market was again dormant on Wednesday, the silence will soon be broken.

Community Health Systems, Inc. plans to price $1.58 billion of seven-year senior secured notes (expected ratings Caa1/B-) on Thursday.

As many as five deals could roll out on Thursday, sources said.

Meanwhile, earnings related news was driving trading activity in the secondary space.

Dean Foods Co.’s 6½% senior notes due 2023 were among the most actively traded issues during Wednesday’s session with the notes dropping after the company announced an earnings miss and a strategic review.

Weight Watchers International’s 8 5/8% senior notes due 2025 were also trading down following an earnings miss.

However, Frontier Communications Corp.’s junk bonds were on the rise following a large earnings beat.

Chesapeake Energy Corp.’s 8% senior notes due 2027 and Whiting Petroleum Corp.’s 6 5/8% senior notes due 2026 were also making gains following their earnings reports and a strong day for crude oil futures.

Community Health Systems brings $1.58 billion

Community Health Systems plans to price $1.58 billion of seven-year senior secured notes (expected ratings Caa1/B-) on Thursday.

The deal is set to be shopped by means of an investor conference call scheduled to get underway at 10:30 a.m. ET Thursday.

Initial price talk is in the 8% area, a trader said.

Credit Suisse is the left bookrunner.

The Franklin, Tenn.-based provider of hospital health care services plans to use the proceeds to refinance its term loan H due 2021.

Late Wednesday it appeared that the month of February would crawl to its conclusion, in the primary market, on Thursday.

However, that might not be the case, a trader warned Prospect News late Wednesday.

As many as five deals could roll out by Thursday's close, the trader said.

Much of the activity would likely stem from the JP Morgan Global High Yield & Leveraged Finance Conference in Miami, which was set to conclude on Wednesday.

The tip surfaced too late to press sources on the buyside for possible names.

Dean Foods drops

Dean Foods’ 6½% senior notes due 2023 were among the major losers of Wednesday’s session following the food and beverage company’s fourth-quarter earnings report.

The 6½% notes dropped 3 5/8 points to 75 1/8 in high-volume activity.

With more than $45 million on the tape by the late afternoon, the notes were the most actively traded in the secondary space.

The notes were trading down on a large earnings miss “amongst other things,” a market source said.

The company reported a non-GAAP loss per share of 50 cents versus analyst expectations for a loss per share of 26 cents.

However, revenue of $1.93 billion beat expectations of revenue of $1.91 billion.

The company also announced it was suspending its quarterly dividend and was launching a strategic review of the company.

The review is expected to include the sale of certain assets, a merger or joint venture with another company, going private, or the sale of the company, a market source said.

Weight Watchers down

Weight Watchers’ 8 5/8% senior notes due 2025 were trading down after the weight loss and fitness company reported fourth-quarter earnings.

The 8 5/8% senior notes dropped 1¾ point to 94 on Wednesday with more than $11 million of the bonds on the tape.

The notes initially gained about ¾ point on Tuesday in the run up to its earnings announcement, according to a market source.

In addition to a large earnings miss, Weight Watchers reported weak guidance for 2019.

The company reported non-GAAP earnings per share of 46 cents versus analyst expectations of earnings per share of 60 cents.

Revenue in the fourth quarter was $330 million versus analyst expectations of revenue of $347 million.

Weight Watchers announced an anticipated $1.4 billion in revenue which fell far below the $1.66 billion analyst expected.

Frontier gains

Frontier’s junk bonds were on the rise on Wednesday after the telecommunications company reported its fourth-quarter earnings.

Frontier’s 11% senior notes due 2025 were the most active in the capital structure.

The 11% notes rose 1 point to 66 with more than $28 million of the bonds on the tape, according to a market source.

Frontier’s 8½% senior notes due 2020 rose 6½ points to 94¼. The 6 7/8% senior notes due 2025 rose 4 points to 56.

The 7 1/8% senior notes due 2023 rose 4 points to 60 3/8.

Frontier reported non-GAAP losses per share of 6 cents versus analyst expectations for losses per share of 15 cents.

Revenue of $2.12 billion beat analyst expectations for revenue of $2.09 billion.

Frontier is expecting EBITDA between $3.45 billion and $3.55 billion for 2019.

Oil names on the rise

Oil and gas names were also on the rise on Wednesday following earnings reports and a strong day for crude oil futures.

Chesapeake Energy’s 8% senior notes due 2027 rose 5/8 point to 99 in high-volume activity, according to a market source.

More than $20 million of the bonds were on the tape by the late afternoon.

Chesapeake reported earnings per share of 21 cents versus analyst expectations for earnings per share of 18 cents.

Revenue was $3.07 billion versus analyst expectations for revenue of $2.28 billion.

Whiting Petroleum’s 6 5/8% senior notes due 2026 were also making gains despite a large earnings miss.

The 6 5/8% senior notes rose 1 5/8 points to 98 with more than $17 million of the bonds on the tape by the late afternoon, according to a market source.

Whiting Petroleum reported a loss per share of 5 cents versus analyst expectations for earnings per share of 58 cents.

Revenue was $473.2 million versus analyst expectations of revenue of $484.96 million. While Whiting’s junk bond rose, its equity fell 11% on the earnings miss.

While earnings news was the major impetus to the trading activity, Wednesday was a strong day for crude oil futures.

Crude oil futures rose to settle at $56.94 on Wednesday, an increase of $1.44, or 2.6%.

Tuesday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Tuesday, a trader said.

High-yield ETFs saw $39 million of inflows on the day.

Actively managed high-yield funds saw $50 million of inflows on Tuesday, the trader said.

With only Wednesday's total pending in the tally of the most recent week's flows, the combined funds are tracking $601 million of inflows, the source added.

Indexes gain

Indexes saw slight gains on Wednesday after a mixed start to the week.

The KDP High Yield Daily index rose 4 basis points to close Wednesday at 69.94 with the yield now 5.98%.

The index was up 3 bps on Tuesday after dropping 3 bps on Monday.

The index saw a cumulative gain of 18 bps on the week last week.

The ICE BofAML US High Yield rose 11.9 bps with the year-to-date return now 6.291%.

The index gained 9.5 bps on Tuesday and 18.3 bps on Monday.

The index saw a cumulative gain of 33.6 bps on the week last week.

The index shot past 6% returns on Monday after passing 5% returns on Feb. 12.

The index initially crossed the 5% threshold on Feb. 5 but sunk below it on Feb. 7.

The index surpassed 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index rose 2 bps to close Wednesday at 106.40. The index dipped 1 bp on Tuesday after rising 11 bps on Monday.

© 2015 Prospect News.
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