Oil and related E&P tick higher for second-consecutive session; Quorum Health down sharply; Valeant rises

By Colin Hanner

Chicago, March 29 – The distressed market set a better tone on Wednesday than in the previous two sessions, a trader said, as oil and oil-related names continued to surge.

“The market definitely felt better today,” a trader said.

Oil future prices were higher for the second consecutive session, with gains credited toward less-than-expected crude oil inventory gains in the U.S., according to weekly data from the Energy Information Agency.

California Resources Corp. led distressed exploration and production companies in gains, though Pacific Drilling Co. and Anadarko Petroleum Corp. posted higher finishes on the session, as well.

Elsewhere, two distressed hospital groups signaled downward, though for different reasons.

Quorum Health Corp. saw an intraday swing of nearly 10 points after the company announced it filed an extension for its annual report for the 2016 fiscal year, citing “efforts by the company to work with its lenders to amend certain provisions of the company’s existing senior credit facility,” a 10-K filing with the Securities and Exchange Commission said.

Whispers of a new health care bill sprouting from a Trump administration spooked Community Health Systems Inc., which pared gains the Franklin, Tenn.-based hospital operator had made after last week’s failed health care legislation.

In pharmaceuticals, Valeant Pharmaceuticals International Inc. and Concordia International Corp. were either up or flat on the session, a change of pace from the past few sessions.

And retail volume was especially low on the session, though a trader said that sector does not react to market tendencies the way other sectors typically would.

E&P’s surge

“Oil was surging and so were oil-related bonds,” a trader said on Wednesday.

The second session of crude oil gains was due to data that showed U.S. commercial crude oil inventories increased by 0.9 million barrels from the previous week, lower than market expectations.

This, along with the sentiment that Organization of Petroleum Exporting Countries will extend production cuts into the second half of the year, has put West Texas Intermediate prices near $50 per barrel once again.

In distressed land, nearly all E&P bonds traded higher on the session.

A market source quoted California Resources’ 8% notes due 2022 with an 80½ bid, 81½ offer, while traders said the notes “shot up” nearly 3 points to 81.

Offshore ultra-deepwater driller Pacific Drilling’s 7¼% notes due 2017 were up “about 1 point” to 54¼, and its 5 3/8% notes due 2020 were up 1½ points to 47½.

The Woodlands, Texas-based Anadarko Petroleum’s 0% notes due 2036 were up 1¼ points to 40¾.

Covington, La.-based Hornbeck Offshore Services Inc., which operates offshore supply vessels to offshore oil and gas companies, was mixed on the session.

Its 5% notes due 2021 were up ¼ point to 61, while the 5 7/8% notes due 2020 were down 1/8 point to 64.

Hospitals down

As Quorum Health filed to extend its annual report on Wednesday, citing efforts to amend its senior credit facility and not because of an investigation into the company, its bonds took a turn for the worse.

A trader said the “growing concern” of the company’s refinancing efforts brought the 11 5/8% notes due 2023 down as low as 84 during intraday trading before rebounding to 90, a 2½-point loss on the day.

Quorum Health’s stock was down 91 cents, or 14.29%, to $5.46.

And Community Health, which was up on Friday and Monday’s session following the failed health care vote, was down on the session.

The 6 7/8% notes due 2022 were “active,” a trader said, and were down 1 point to 85½.

Media reports from Washington indicate that discussions took place over the weekend and early this week between Republicans to bring new health care legislation before Congress, with Bloomberg citing two Republican lawmakers who say a vote may take place next week over new health care legislation.

Valeant up on maturity pushback

On Wednesday, Valeant announced it had extended the maturity date of $1.19 billion of revolving credit commitments from April 20, 2018 to April 20, 2020, or 91 calendar days prior to the scheduled maturity of any series or tranche of term loans, according to an 8-K filing with the SEC.

Bonds were up on the news, with the 6 1/8% notes due 2025 leading gains of the company’s notes with a 1¼-point gain to 76.

The 7½% notes due 2021 were up 1 point to 86 5/8.

Fellow pharmaceutical company Concordia International took a different change of pace on the session, as well.

The 9½% notes due 2022 were unchanged at 67¾, while the 7% notes due 2023 were up 1½ points to 18¼.

Retail’s standstill

A trader said he did not see “a ton of stuff trading” in the distressed retail sector on Wednesday, adding that the volume from Neiman Marcus Group, Inc. and Tailored Brands, Inc. was insubstantial.

“There was nothing real,” a trader said. “That sector has been so out of favor that it’s not going to rally with the rest of the market. People may try to push it up, but it’s not going to rally.”

Distressed roundup

Dallas-based electric utility company Energy Future Holdings Corp.’s 11¼% notes due 2017 were “softer,” a trader said, trading down 3 points to 62.

Satellite telecommunications company Intelsat Jackson Holdings SA’s 5½% notes due 2023 were up ½ point to 87¾.

And global shipper Navios Maritime Holdings Inc.’s 8 1/8% notes due 2019 were up ¾ point to 88¾ on a “half-dozen” trades, a trader said.

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