Community Health climbs in line with share surge; energy up as crude continues rise

By Paul Deckelman

New York, Jan. 11 – Traders in distressed debt and the bonds and notes of otherwise underperforming companies and sectors saw a busy day on Thursday with most issues on the upside, in line with broad gains in active trading in the overall larger high-yield bond market.

They noted particularly robust activity in hospital operator Community Health Systems Inc.’s several series of bonds, which were all up multiple points, in line with a surge in the company’s shares after its biggest investor increased its equity holdings.

Energy names like California Resources Corp. and EP Energy Corp. showed solid gains as crude oil prices continued their recent firming trend.

That strength extended to the offshore drilling sector, which also got a boost as Ensco plc priced a sharply upsized new eight-year note offering, which firmed smartly in heavy trading when it hit the aftermarket. The company’s existing bonds were also better, as were the notes of sector peers Noble Holding International Ltd. and Transocean Ltd.

Away from energy, communications satellite operator Intelsat SA’s bonds – both its Intelsat Jackson Holdings SA and Intelsat (Luxembourg) SA issues – rebounded after several days on the downside.

And retailer Rite Aid Corp.’s bonds continued to add to gains seen on Wednesday.

Community Health up with stock

A “fair amount” of Community Health Systems’ bonds traded around, one market source said, seeing the Franklin, Tenn.-based hospital operator’s 8% notes due 2019 “up 3 or 4 points” in a 90½ to 90¾ bid context, with over $60 million changing hands during the session.

A second trader declared that “CYH had been much maligned over the last year – but had a lot of volume today.”

To underscore that contention, he marveled “holy cow!” when he looked at the actual volume levels.

He noted that the 8% notes “were trading between 87½ and 87¾ on Monday – now they’re 90½ to 90¾.”

The company’s 6¾% notes due 2022 jumped by 3 7/8 points, a trader said, ending at 63 7/8 bid, with more than $34 million of volume, while its 6¼% notes due 2023 improved by 1¼ points to 92¾ bid. Its 7 1/8% notes due 2020 likewise firmed to 80 1/8 bid, with over $12 million of each of the latter two issues traded.

The bonds got a boost from a surge in Community Health’s New York Stock Exchange-traded shares, which zoomed by 95 cents, or 23.63%, finishing at $4.97. Volume of 11.6 million shares was almost four times the norm.

The shares and bonds shot up after Shanda Group, a Chinese investment company that is currently Community Health’s largest shareholder, said in a Securities and Exchange Commission filing that it had increased its already considerable stake, bringing its holding to 24% of the outstanding shares.

Energy issues keep improving

Traders said that energy credits continued to head skyward, in line with another rise in crude oil prices Thursday.

Among the exploration and production names, a market source said that Los Angeles-based California Resources’ 8% second-lien senior secured notes due 2022 – considered a sector bellwether issue – rose by 1¼ points Thursday, closing at 88¼ bid, on volume of more than $34 million.

Houston-based exploration and production company EP Energy’s 8% notes due 2025 were up 1 1/8 points at 80½ bid, with more than $40 million of turnover, while its 9 3/8% notes due 2024 improved by 5/8 point on the day to 87 1/8 bid, with more than $36 million of activity.

Among the offshore drilling contractors, Transocean Ltd.’s 6.8% bonds due 2038 gained nearly ¾ point on the day, finishing at 86¼ bid, with over $17 million traded.

Cayman Islands-based sector peer Noble Holding International Ltd.’s 7¾% notes due 2024 were seen pushing upward by 1 7/8 points to 95¼ bid, on over $16 million of volume.

Those gains – quite a comeback from mostly lower levels in the sector on Wednesday, despite higher oil prices – took place against a backdrop of crude prices that were yet again firmer, their fourth straight gain and sixth advance in the last seven sessions. Crude prices are now at their highest point since early 2015.

Key domestic grade West Texas Intermediate for February delivery rose by 23 cents per barrel in New York Mercantile Exchange dealings, settling at $63.80 – coming off intraday highs of nearly $1 above that. The main international grade, March-contract North Sea Brent crude, was up by 6 cents per barrel in London futures trading, ending at $69.26. Brent reached an intra-day high above the symbolic $70 per barrel level.

Rite Aid rise continues

Elsewhere, Camp Hill, Pa.-based drugstore chain operator Rite Aid’s paper was seen solidly better for a second straight session on Thursday.

Its benchmark 6 1/8% notes due 2023 jumped by 2¼ points Thursday to 94¼ bid, as more than $32 million traded.

Its 6¾% notes due 2021 gained 1 full point Thursday to finish at 101¾ bid, on volume of more than $17 million.

Market sources pointed to new reports indicating that company executives had given a well-received presentation on Wednesday at the 36th annual J.P. Morgan Healthcare Conference, touting the benefits – including substantial deleveraging – that will accrue from the company’s pending nearly $4 billion sale of almost half of its more than 4,000 United States-based stores to larger rival Walgreens Boots Alliance.

They unveiled what they called “the new Rite Aid” – which they claim will be smaller but more nimble and able to operate with more flexibility and efficiency.

Intelsat on the rebound

After several sessions of losing altitude, the bonds of Luxembourg-based communications satellite operator Intelsat were seen by traders somewhat firmer Thursday, in busy trading.

A trader saw the Intelsat Jackson 5½% notes due 2023 up ½ point at 80¾ bid, while its subordinated Intelsat (Luxembourg) 7¾% notes due 2021 were 1½ points better at 48 bid, with over $15 million of each issue having traded.

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