MF Global bonds gyrate, end down 10-plus points; Sprint slips; Nursing home arena dips

By Stephanie N. Rotondo

Portland, Ore., Oct. 28 - Distressed debt was generally weaker to unchanged Friday, and trading volume was muted, according to traders.

"It seems like the market took a little respite," a trader said.

MF Global Holdings Ltd.'s bonds continued to take a ride Friday, following a week of gyrations that began when Moody's Investors Service downgraded the company on Monday. But the hits didn't stop there, as the company reported earnings on Tuesday.

Moody's again downgraded the firm on Friday.

Meanwhile, Sprint Nextel Corp.'s paper was on the decline despite news that the company was nearing terms on a pact with its network partner Clearwire Corp.

For its part, Clearwire ended down to better, depending upon whom you asked.

In bank loans, the nursing home arena - which includes such names as Skilled Healthcare Group Inc. - was weakening on fears of decreased Medicaid reimbursements.

MF Global ends week softer

MF Global Holdings' 6¼% notes due 2016 gyrated again on Friday as Moody's cut its rating on the New York-based futures firm yet again - the second time in less than a week.

A trader said the debt was active, falling into the low-30s before coming back to 48 bid, 49 offered. He said that was still down 10 to 12 points from the previous session.

Another trader said the debt hit a low of "35-ish" and a high of "50-ish" in "very active" trading.

The bonds did dip as low as the high-30s before closing out in the high-40s, said yet another trader.

Moody's dropped its rating on the company to Ba2 from Baa3, the second time the ratings agency downgraded the company over the course of the week. On Monday, Moody's dropped its long-term rating to Baa3 from Baa2, alleging that the firm was not properly managing risk.

Moody's cited concerns about MF Global's European risk as the basis for its action on Friday.

On Thursday, news reports were out regarding a potential sale of the company's futures business. The firm run by John Corzine was said to be talking to various big banks about taking over the business.

Fitch Ratings then cut its rating on MF Global to BB+, its highest junk rating, citing the challenges of earning profits from interest in the current low interest rate environment.

Standard & Poor's placed the firm on CreditWatch with negative implications on Wednesday.

On Tuesday, MF Global reported a net loss of $191.6 million, or $1.16 per share, for the third quarter. That compared to a loss of $94.3 million, or 59 cents per share, the year before.

Revenues dropped 14.3% to $205.9 million.

The firm is reported to have about $6 billion in European exposure. That compares to the $12 million in revenues earned from its principal trading unit in the last quarter.

Sprint slips, Clearwire mixed

Sprint Nextel paper was falling Friday despite reports that the company was nearing an agreement with Clearwire, its WiMax network partner.

One trader said the 6% notes due 2016 were "really active" and a point weaker at 88.

The trader also saw Clearwire's 12% notes due 2015 down a deuce at 87 bid, 88 offered.

At another desk, a trader said the 6.9% notes due 2019 were down a point at 841/2. He also called the 8 3/8% notes due 2017 a point softer at around 93.

However, he deemed Clearwire "a little better" at 87 bid, 88 offered.

Overland Park, Kan.-based Sprint and Kirkland, Wash.-based Clearwire are reportedly coming to terms on a deal that would extend their relationship for three to five years after 2012 - the date on which Sprint said it would cease selling devices compatible with Clearwire's network. Sprint is constructing its own LTE network.

However, the new agreement will likely not include more financing support for cash-strapped Clearwire.

Nursing home names slide

The nursing home sector was under scrutiny as there was news out that Skilled Healthcare Group is facing a 10% decrease to Medicaid reimbursement for California, and as a result, Skilled Healthcare, Kindred Healthcare Inc. and HCR ManorCare saw term loan levels fall, according to traders.

One trader remarked that Skilled Healthcare has 40% of its revenues coming from California and the reimbursement cut would trim about $10 million from EBITDA.

He went on to explain that the chatter was not good for a sector that is already looking at an 11% drop in Medicare payments.

And, Kindred Healthcare also has a large amount of facilities in California, which may have contributed to its decline, the trader added.

With the news, Skilled Healthcare, a Foothill Ranch, Calif.-based operator of long-term care facilities, saw its term loan quoted by a trader at 93½ bid, 94½ offered, down from 94 bid, 95½ offered.

Meanwhile, Kindred Healthcare, a Louisville, Ky.-based health care services company, saw a larger drop, with its term loan quoted by traders at 92½ bid, 94½ offered, down from 94½ bid, 96½ offered.

And, ManorCare, a Toledo, Ohio-based provider of short-term, post-acute services and long-term care, experienced a reaction in line with Kindred Healthcare's as one guy was quoting the paper at 87 bid, 89 offered, down from 89 bid, 91 offered.

A second trader, however, was seeing ManorCare's loan at 89 bid, 91 offered on Friday afternoon. He had not seen levels on Thursday, but on Wednesday he was quoting it at 90 bid, 91½ offered.

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