Community Health softens; Diversified Healthcare paper higher on week; Transocean down

By Cristal Cody

Tupelo, Miss., July 8 – Bonds in the health care space remained mostly under pressure on Friday in light secondary trading.

Community Health Systems Inc.’s notes went out flat to softer on the day and down about 4 points or more on the week.

Diversified Healthcare Trust’s bonds were mixed on Friday but higher on the week after the real estate investment trust sold a 10% stake in Boston Life Sciences Complex for $108 million, a source said.

Market tone was mixed with stocks mostly lower after the Labor Department reported that June employment rose by 372,000, beating forecasts of a 265,000 increase.

The unemployment rate was flat for a fourth consecutive month at 3.6%.

Secondary trading has been lighter in the short market week with thin primary action and desks lightly staffed following the Fourth of July holiday, sources report.

The iShares iBoxx High Yield Corporate Bond ETF edged up 0.11% to $74.91.

Oil prices gained. The West Texas Intermediate crude oil benchmark futures for August deliveries settled up $2.06 to $10.479 a barrel after improving $4.20 on Thursday.

Distressed offshore driller Transocean Inc.’s bonds softened about ¾ point to 1¾ points on Friday following a downgrade from S&P Global Ratings.

CHS declines

CHS/Community Health Systems, Inc.’s 6 1/8% senior secured notes due 2030 (Caa2/CCC) declined more than 1 point to the 56½ bid area by the close, a source said.

The bonds ended the week about 4¾ points lower.

CHS/Community Health’s 6 7/8% senior notes due 2029 (Caa2/CCC) went out at the 60 bid range, mostly unchanged on the day but about 4 points softer on the week.

Bonds from the Franklin, Tenn.-based operator of acute care and outpatient facilities have been under pressure since April after the company reported a first-quarter loss.

Diversified Health eyed

Diversified Healthcare’s 4 3/8% senior notes due 2031 (B2/BB) went out Friday mostly unchanged at 68 bid, about ½ point higher on the week, a source said.

Their 4¾% senior notes due 2028 (B3/BB-) traded at the 73¾ bid range, up nearly ½ point on the day and more than 2 points better this week.

Diversified Healthcare is a Newton, Mass.-based REIT that specializes in owning U.S. health care properties.

Transocean weaker

Transocean’s 8% debentures due 2027 (C/CCC-) softened about ¾ point to 65¾ bid over the session, a source said.

The notes were ending the week about 2¼ points lower.

Transocean’s 6.8% senior notes due 2038 (C/CCC-) also fell about 1¾ points to 50¼ bid on Friday. The issue was about 2 points softer from a week ago.

S&P Global Ratings said Thursday it downgraded the Vernier, Switzerland-based offshore driller on expectations the company likely will undertake a debt exchange, debt restructuring or other transaction it could view as distressed within the next six months.

Distressed index higher

The S&P U.S. High Yield Corporate Distressed Bond index continued to improve on Thursday with one-day total returns at 0.73% versus minus 0.11% on Wednesday and minus 0.95% on Tuesday.

Month-to-date total returns rose to minus 0.73% from minus 1.44% on Wednesday and minus 1.34% at the start of the holiday-shortened week.

Year-to-date total returns improved to minus 23.19% from minus 23.74% on Wednesday and minus 23.66% on Tuesday.

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