Community Health, Walter Investment loans retreat with earnings; Russell changes surface

By Sara Rosenberg

New York, May 3 – Community Health Systems Inc.’s term loan H continued to soften in trading on Tuesday on the back of the recent release of disappointing first quarter earnings results, and Walter Investment Management Corp.’s first-lien term loan dropped a few points, also with quarterly financials.

Moving to the primary market, Russell Investments raised pricing on its term loan B, widened the original issue discount and extended the call protection, and WideOpenWest Finance LLC accelerated the commitment deadline on its add-on term loan B.

Community Health slides

Community Health Systems’ term loan H was once again lower as investors continued to react to the announcement of first quarter numbers that fell short of expectations, according to a trader.

The term loan H was quoted at 97½ bid, 98 offered, down from 98¼ bid, 98¾ offered post-numbers late Monday and 98½ bid, 99 offered pre-numbers on Monday, the trader said.

For the quarter, the company reported net income of $11 million, or $0.10 per diluted share, compared to net income of $79 million, or $0.68 per diluted share, in the first quarter of 2015.

Net operating revenues for the quarter were about $5 billion, up from around $4.9 billion in the comparable period last year.

And, adjusted EBITDA for the first quarter was $633 million, versus $715 million in the prior year.

Community Health Systems is a Franklin, Tenn.-based hospital company.

Walter Investment falls

Walter Investment’s first-lien term loan softened to 84 bid, 85 offered from 87½ bid, 88½ offered after first quarter numbers were released, a trader remarked.

For the quarter, the company reported a net loss of $172.7 million, or $4.85 per share, compared to a net loss of $31 million, or $0.82 per share, in the prior year.

Total revenue for the quarter was $66.8 million, down from $310.9 million in the first quarter of 2015.

And, adjusted EBITDA for the quarter was $87.1 million, versus $162.7 million in the comparable period in the previous year.

“First quarter performance was significantly impacted by the challenging rate environment. The decline in rates drove a volatile MSR market and negatively impacted results through the revaluation of mortgage servicing rights and accelerated prepayments,” said Denmar J. Dixon, vice chairman of the board, chief executive officer and president, in a news release.

Walter Investment is a Tampa, Fla.-based diversified mortgage banking firm.

Russell reworks loan

Switching to the primary market, Russell Investments lifted pricing on its $650 million seven-year covenant-light term loan B to Libor plus 575 basis points from talk of Libor plus 450 bps to 475 bps, moved the original issue discount to 97 from 98.5 and pushed out the 101 soft call protection to one year from six months, according to a market source.

Additionally, the 18-month MFN sunset was eliminated, the incremental free and clear was cut to $100 million from $150 million and the incremental incurrence ratios were revised to 3.75 times first-lien net leverage and 5.25 times total net leverage, which is 0.25 times less than initially proposed, the source said.

Also, the excess cash flow sweep was modified to 75% at more than 3.5 times first-lien net leverage, 50% at more than 3 times first-lien net leverage and 25% at less than 2.5 times first-lien net leverage, from opening at 50%.

As before, the term loan has a 1% Libor floor.

The company’s $700 million credit facility (Ba2/BB/BB) also includes a $50 million five-year revolver.

Russell being acquired

Proceeds from Russell Investments’ credit facility will be used to help fund its buyout by TA Associates and Reverence Capital Partners from London Stock Exchange Group plc in a transaction valued at $1.15 billion, subject to customary closing adjustments.

Barclays, Macquarie Capital (USA) Inc. and Credit Suisse Securities (USA) LLC are leading the debt.

Commitments are due at noon ET on Wednesday, the source added.

Closing on the buyout is expected in the first half of this year, conditioned on regulatory and other required approvals.

Net leverage is 3.9 times.

Russell Investments is a Seattle-based asset manager.

WideOpenWest changes deadline

WideOpenWest moved up the commitment deadline on its $382.5 million add-on term loan B due April 1, 2019 to 10 a.m. ET on Wednesday from noon ET on Thursday, a market source said.

Pricing on the add-on term loan is Libor plus 350 bps with a 1% Libor floor, in line with existing term loan pricing, and the new debt is offered at an original issue discount of 99.51.

Morgan Stanley Senior Funding Inc. and SunTrust Robinson Humphrey Inc. are leading the add-on loan that will be used to repay term loan B-1 borrowings and to pay related fees and expenses.

WideOpenWest is a Denver-based provider of data, video and telephone services.

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