Community Health bonds rally; iHeartMedia lower; WeWork drops; default forecast eyed

By Cristal Cody

Tupelo, Miss., June 14 – Community Health Systems Inc.’s bonds continued to rally on Wednesday after improving in the prior session.

Community Health’s 6 7/8% senior secured notes due 2029 (Caa2/CCC-) were up 2 points.

iHeartMedia, Inc.’s paper declined in one of the most active issues seen moving over the session, a source said.

The 5¼% senior secured notes due 2027 (B1/BB-) fell nearly 1 point on more than $14 million of trading.

Secondary action thinned on Wednesday as market focus turned to the Federal Reserve’s rate decision.

Equity indices closed mixed following the Fed’s announcement that it would pause rate hikes and maintain the target range for the Federal Funds rate at 5% to 5¼%.

The S&P 500 index was up 0.08%.

The iShares iBoxx High Yield Corporate Bond ETF rose 3 cents, or 0.04%, to $74.76.

The CBOE Volatility index dropped 5.07% to 13.87.

WeWork Inc.’s notes came under renewed pressure following news reports regarding the exit of chairman and chief executive officer Sandeep Mathrani, going out down about 1¼ points to 1¾ points in mostly light trading.

Meanwhile, junk defaults are expected to “trend higher over the remainder of the year,” Fitch Ratings said in a report on Wednesday.

High-yield defaults are forecast to end 2023 in the 4½% to 5% range.

The U.S. high yield trailing 12-month default rate was unchanged in May at 1.9%, based on par value, Fitch said.

Fitch said its top market concern bond list declined slightly in June to $52.7 billion from $53.3 billion in May, but only because “removals due to bankruptcy filings outpaced additions.”

The list of junk issuers Fitch expects to default within two years has grown significantly from a $17.3 billion total in June 2022.

Health care/pharmaceutical names make up the largest amount of the list with 34% of the total, followed by retail and telecom at 14% and 13%, respectively.

Community Health up

Community Health’s 6 1/8% secured notes due 2030 (Caa2/CCC-) rallied 2¾ points over the afternoon before heading out up more than 3 points at around 61¼ bid on $4 million of trading, a source said.

The bonds went out Tuesday 1 point better.

Community Health’s 6 7/8% senior secured notes due 2029 (Caa2/CCC-) also were up 2 points to around 62¼ bid on Wednesday on more active trading totaling $5.1 million.

Shares in the Franklin, Tenn.-based operator of acute care and outpatient facilities added 1.22% to close the day at $4.15.

iHeartMedia softens

iHeartCommunications, Inc.’s 5¼% senior secured notes due 2027 (B1/BB-) were moving more than ¾ point lower in strong trading totaling $14.32 million on Wednesday, a source said.

The bonds went out with a 76 bid handle.

iHeart’s paper improved by more than 10 points in the prior week.

The San Antonio-based media broadcasting company’s stock (Nasdaq: IHRT) closed down 1.64% on Wednesday at $3.59.

WeWork notes decline

WeWork’s 7 7/8% senior notes due 2025 slipped 1¼ points by the close to 41 bid, a market source said.

Overall trading was light at $3.5 million.

WeWork’s stock climbed 7.25% on about double the average volume to 21 cents, near record lows of 16 cents hit in April. The 52-week high is $6.39.

The New York-based office share company announced in May that Mathrani would step down as chairman, CEO and director of WeWork effective May 26.

WeWork board member David Tolley was appointed as interim CEO, while independent director Daniel Hurwitz will serve as chairman of the board and lead a special committee to search for a permanent chief executive officer.

Distressed index stronger

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns improved on Tuesday to 0.6% from 0.28% on Monday.

Month-to-date total returns also climbed to 4.12% from 3½% at the week’s start.

Year-to-date total returns moved up to 11.04% on Tuesday from 10.37% on Monday.

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