Community Health up as health care bill loss continues to sink in; Valeant down; energy mixed

By Colin Hanner

Chicago, March 27 – Activity was slow again on a lackluster session in the distressed market, traders said, with volume light across all sectors.

Health care and energy started lower in the day, a trader said, mirroring similar movement in the equity market, but it “kind of rallied back” as the session ended.

“I think the market struggled to get its footing today,” a trader said. “I think people were assuming things were going to be pretty weak with the way stocks opened ... some of the high-quality stuff was trading better, but nothing was overly active. It was the same names we always talk about.”

Community Health Systems, Inc. was “pretty active by normal standards,” a trader said and edged higher in its most-traded issue. On Friday, the Franklin, Tenn.-based hospital operator, along with several other hospital groups, saw gains after the House failed to vote on a health care bill that could have had implications that would have severely upended how health care operators work.

The same gains were not seen for pharmaceutical company Valeant Pharmaceuticals International, Inc., which closed lower on the day, though remained one of the more active names in the distressed arena.

In exploration and production, oil futures closed marginally lower on the day in response to the lack of confidence expressed in an Organization of Petroleum Exporting Countries meeting held over the weekend to discuss extending production cuts currently in place.

Distressed energy names were mixed, including MEG Energy Corp., which was slightly higher, and California Resources Corp., which closed nearly a point lower.

Community Health caps on health care

A health care bill that had been causing much consternation for health care providers and hospital operators especially last week – not to mention legislators who tried to pass the bill to an unwavering Congress and a vocal displeased public – was finally laid to rest on Friday, unable to get past the 100-day term in Trump’s presidency.

As a result, hospital operators continued to rally on Monday, including Community Health, whose 6 7/8% notes due 2022 were up 1 to 87½, a trader said. Though its activity was near the top of the most-active list for the day, it was mild in comparison to past sessions.

Nearly all movement from the past week could be traced back to the health care bill and its final result, a trader said.

“Everything’s been linked to the healthcare bill,” a trader said. “There’s been a fair amount of hesitation in the market. ... I think guys are in pause mode.”

Pharma down

On Friday, pharmaceuticals posted gains following the shutdown of the proposed health care bill, but took a different direction on Monday.

Valeant’s 6 1/8% notes due 2025 were down ½ point to 75, a trader said, while the 5 7/8% notes due 2023 mirrored those losses and finished with a 75½ handle.

Endo Pharmaceuticals plc’s 6% notes due 2025 were down almost 1 point to 84 1/8, a trader said.

Uncertain oil

In a potential indication of things to come in the next few months, OPEC concluded that further evaluation of the sector would judge whether production cuts would be extended for the second half of the year, even though cuts do not seem to be adequately addressing the current glut.

The non-decision did little to satisfy the market, as oil futures traded down on the day, albeit slightly.

Distressed names were mixed.

Candian oil sands producer MEG Energy’s 7% notes due 2024 were up ¼ point to 86, a trader said.

Plano, Texas-based oil and natural gas exploration and production company Denbury Resources Inc.’s 6 3/8% notes due 2021 down 1 point to 80½, according to a market source.

And California Resources’ 8% notes due 2022 were down ¾ point to 77.

French geophysical company CGG SA, which works mainly with the E&P sector, was up on the session, though its gains could be more attributable to news that CGG created new ownership for five vessels it currently owns or co-owns in its fleet.

All outstanding debt related to those vessels will be transferred to the new company, a news release said.

CGG’s 6 7/8% notes due 2022 were up 1½ points to 47.

Its 6½% notes due 2021 were up 1 to 46¾.

Retail mixes

Noting that J. Crew Group, Inc. has fallen several points from heights it reached shortly after it posted its fourth quarter results last week, a trader said its 7¾% notes due 2019 were down again on Monday.

Traders said the notes were down ½ point to 43½, a 3 to 3½ point loss since last week.

“Those are slowly coming back in,” a trader said.

Retailer Neiman Marcus Group’s 8% notes due 2021 were up 1/8 point to 58¾.

Intelsat ‘softer’

Intelsat Luxembourg Holdings SA’s 7¾% notes due 2021 were down ¾ point to 59, a trader said.

This comes on the heels of the satellite telecommunications company commencing a debt exchange offer for a variety of issues across its subsidiaries.

As for the issuance’s weakening on the day, a trader said it could be a variety of factors.

“It was probably a mix of general market opening a little weaker, [as well as] the exchange offer on Friday – there was nothing different in there,” the trader said. “I don’t know if the market expected to have a better deal floated at them, [but] that hasn’t happened yet.”

iHeart down

Down just a smidge were iHeartCommunications, Inc.’s 9% notes due 2021, which were down 1/8 point to 74 7/8, a trader said.

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