Valeant sees big gains after debt reduction; Hertz down on earnings miss; Intelsat lower ahead of exchange deadline

By Colin Hanner

Chicago, May 9 – Earnings provided a jumpstart in the distressed debt market on Tuesday, market sources said, with Valeant Pharmaceuticals International, Inc. leading the space with surging gains after the company released its first quarter figures.

Swinging in the opposite direction, Hertz Global Holdings, Inc. missed projections and was down on the day.

With a several-point downswing as well, Intelsat SA’s subsidiaries reacted to the looming exchange offer deadline, which will take offers until midnight ET on Wednesday.

Community Health Systems Inc. announced a $700 million add-on early Tuesday, though that did little to move one of its distressed notes, which was unchanged on the day.

Frontier Communications Corp. was lower following its earnings last week, and GenOn Energy Corp. continued inching higher on an earnings-driven session.

Valeant shows up

Valeant Pharmaceuticals was the most active distressed name on Tuesday, led by its 6 1/8% notes due 2025, which were up “2 and change” points to 78 1/8, a market source said.

Its 5 7/8% notes due 2023 were up 2½ points to 78 7/8.

The 7½% notes due 2021 were up 3¾ points to 89½.

And its 5 3/8% notes due 2020 were up 2¾ points to 91 5/8.

Out of its earnings, revenue was down year-over-year by 11% to $2.109 billion, yet Valeant raised its full-year adjusted EBITDA to a $3.6 billion to $3.75 billion range, up from a $3.55 billion to $3.75 billion range.

“Debt reduction continues to be a priority,” said Joseph C. Papa, chief executive officer of Valeant, according to a transcript of the earnings call.

He said that the company reduced its debt by $3.6 billion year-over-year, including $1.3 billion in the first quarter of 2017, which brings its total debt load down to $28.9 billion.

Attempting to quash the murmurs that the company is insolvent when it comes to repaying its debt, Papa responded.

“We can meet all of our financial obligations through a combination of cash generation from our business, asset sales, and importantly, refinancings,” Papa said. “There's a permanent role for debt in our capital structure.”

On the day, the company’s stock was up $2.34, or 24.1%, to $12.05.

In a related sphere, Concordia International Corp.’s 9% notes due 2022 were up 1¼ points to 72¾, a trader said, while its 7% notes due 2023 were up 1½ points to 20 3/8.

The company will release its first quarter results before the market opens on Wednesday.

Hertz puts the brakes on

The second most-active name for the day was Hertz, especially its 6¼% notes due 2022, which were down 1¾ points to 88¾, a trader said.

On Monday night, the company announced a net loss of $223 million, compared to $52 million the same period last year, and a total revenue of $1.9 billion, a 3% decline from the same period last year.

An excessive fleet compared to the market demand challenged revenue for the quarter, as well as the rise of consumers utilizing rentals for ride-sharing services, said Thomas C. Kennedy, chief financial officer of Hertz.

Intelsat down

With an exchange offer expiring tomorrow for Intelsat’s subsidiaries, there is “concern that there will be no exchange offer change,” a trader said. A market source said the company is “keeping the swap terms unchanged.”

Intelsat Jackson Holdings SA’s 7¼% notes due 2021 were down 4¾ points to 53, a trader said.

And Intelsat Luxembourg Holdings SA’s 8 1/8% notes due 2023 were down 5 points to 52.

Previously, Intelsat extended the offers until midnight ET on May 10 from midnight ET on April 20.

Community Health stays still

The Franklin, Tenn.-based hospital operator’s 6 7/8% notes due 2022 were unchanged at 89, a market source said.

Community Health planned to do a $700 million add-on to its existing 6¼% senior secured notes due March 31, 2023, high-yield syndicate sources said Tuesday. As of press time, it had not priced.

Distressed roundoff

Frontier Communications’ 11% notes due 2025 were down 2 1/8 points to 93 3/8, followed by its 10½% notes due 2022, which were down 1 1/8 points to 98¾, a trader said.

GenOn Energy’s 9½% notes due 2018 were up 2¼ points to 68½.

Tween accessories retailer Claire’s Stores Inc.’s 9% notes due 2019 were down 1/8 point to 46.

And Pacific Drilling Co.’s 7¼% notes due 2017 were up 3/8 point to 52.

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