iHeart reaches restructure agreement, files bankruptcy; Toys requests approval to end U.S. operations

By James McCandless

San Antonio, March 15 – Traders described a more active day in the distressed debt market Thursday as much of the activity was driven by the day’s news.

To the surprise of some traders, iHeart Media, Inc. filed for Chapter 11 bankruptcy while reaching a restructuring agreement that would significantly reduce its debt.

Toys “R” Us, Inc. sought court approval Thursday to begin the process of shutting down its U.S. locations after failing to find a buyer since its recent bankruptcy filing.

Community Health Systems, Inc. paper continued to drive much of the volume in the distressed healthcare sector, coming off of news that it enlisted asset management firm Lazard to assist with its debt.

Frontier Communications Corp. and Intelsat SA added to the day’s volume in distressed telecom. Another distressed healthcare name adding to Thursday activity was Mallinckrodt plc. Sears Holdings Corp. saw a jump in activity after releasing positive Q4 numbers.

iHeart bankrupt

After a few days of extending a forbearance agreement for failure to pay interest on some notes, market sources confirmed that San Antonio-based outdoor communications company iHeart has reached a restructuring plan to reduce its debt by $10 billion and filed for Chapter 11 bankruptcy (see related story elsewhere in this issue).

“There were some positive signs over the past few days,” a trader said. “But this is probably the safest thing for them to do.”

The 7¼% notes due 2027 fell about 1¼ point to close near 16¾ bid. The 2% notes due 2021 remained level at 14. The 10 5/8% notes due 2023 cratered about 9½ points to close at 80½ bid.

Toys ‘R’ Us seeks orderly closure

Wayne, N.J.-based bankrupt toy retailer Toys “R” Us sought court permission Thursday for an orderly wind-down of its U.S. operations after failing to find a buyer. The company is still in talks to sell off its Canadian operations, which could include its best performing American stores (see related story elsewhere in this issue).

The 8¾% issues due 2021 lost about 3¾ points to close at around 5¼ bid. The 7 3/8% issues due 2018 traded down about 6¾ points to close at 5¼ bid.

Community Health active

After Wednesday’s news that Franklin, Tenn.-based hospital operator Community Health Systems had enlisted the services of asset management firm Lazard to help manage its debt, traders confirmed its paper continued to dominate the distressed healthcare sector.

“Some think that this shows they are serious about turning things around,” a trader said. “They will probably still have to sell off some hospitals. It may be a painful year for them but they may come out alright on the other side.”

The 7 1/8% paper due 2020 gave back Tuesday’s gain of 3 points to close at 79 bid. The 6 7/8% paper due 2022 fell about 2 points to close at 58 bid.

Volume names trade

Norwalk, Conn.-based wireline telecom name Frontier Communications has been perennially active in the distressed telecom space, bolstered by a recent pricing of new issues and its ending of a quarterly dividend in favor of focusing on debt repayment.

On Thursday its 7 5/8% notes due 2024 lost about ¾ point to close at just above 60 bid. The 10½% notes due 2022 shaved off ½ point to close at 87 bid. The 11% notes due 2025 rose slightly to close just above 81½ bid.

Luxembourg-based satellite communications company Intelsat also traded heavily in distressed telecom.

The Intelsat Jackson SA 5½% issues due 2023 trended down ¼ point to close at 81¾ bid. The 7¼% issues due 2020 also fell ¼ point to close at 93¾ bid.

Britain-based drug maker Mallinckrodt has contributed to the volume in distressed healthcare since finishing a $1.2 billion acquisition, expanding into the North American market.

The 4¾% paper due 2023 lost about 2½ points to close at 79 bid.

Hoffman Estates, Ill.-based bankrupt retailer saw a bump in activity after releasing favorable Q4 numbers, but CEO Eddie Lampert warned in a shareholder call that the numbers were due to holiday sales and are not indicative of long-term trends.

The 6 5/8% notes due 2018 picked up about 4¾ points to close at around 70 bid. The 8% notes due 2019 hovered around the 35 bid level to end the day.

“Today felt better than recent days,” a trader said. “There seemed to be more activity out there. That may die down after what feels like a news-heavy period.”

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