Ruby Tuesday jumps on buyout news; hospital names steady after Friday beating; Concordia climbs

By Paul Deckelman

New York, Oct. 16 – Distressed-debt trading was seen quiet on Monday amid lessened overall activity in the broader high-yield bond market.

But Ruby Tuesday, Inc.’s bonds firmed smartly on the news that the underperforming restaurant chain operator is to be bought out by a private-equity company.

And traders saw hospital names such as Community Health Systems Inc. and Tenet Healthcare Corp. steady, after being knocked around in Friday’s dealings amid news of planned changes in the Affordable Care Act. However, HCA Inc. paper remained under pressure.

Concordia International Corp.’s secured notes firmed on Monday – even as the Canadian drug manufacturer said it would defer a scheduled interest payment on one of its unsecured bond issues.

Ruby Tuesday rises

A trader said that “it was slow going in distressed” on Monday, “really bad.”

But one major exception was Ruby Tuesday, Inc.’s 7 5/8% notes due 2020, which shot up by more than 3 points Monday, ending at around 102½ bid, with over $13 million changing hands.

That sharp improvement was in line with the company’s New York Stock Exchange-traded shares, which zoomed by 37 cents, or 18.59% Monday, closing at $2.36, on volume of nearly 24 million shares – roughly 78 times their daily norm.

The shares and bonds soared on the news that the Maryville, Tenn.-based operator of more than 500 casual dining restaurants across the U.S. had agreed to be bought out by NRD Capital, a private-equity company.

NRD will pay $2.40 per share, or $146 million, for the company; including debt assumption, the deal has an enterprise value of about $335 million.

The deal is expected to close in early 2018

The deal comes after four straight years of declining sales, which forced Ruby Tuesday into closing some of its weaker-performing outlets as it tried to straighten things out.

The company said in March that it was looking for ways to revive its business, possibly including the sale of the company or merger with another restaurant operator.

Concurrently with the sale announcement, Ruby Tuesday released results for its fiscal 2018 first quarter; it lost $9.8 million, or 16 cents per share, although that was an improvement from its year-ago results.

Same-store sales at restaurants open for at least one year fell 5.8% from year-earlier levels.

Hospital names a little healthier

Traders said that the recently beleaguered hospitals sector – which came under renewed pressure last week amid news of Trump Administration changes in the Affordable Care Act, popularly known as Obamacare – seemed to have regained some of their footing on Monday.

A trader said that Community Health Systems’ 6 7/8% notes due 2022 “saw something of a bounce,” rising ½ point on the day to 74 bid.

Another trader saw the issue going out at 73¾ bid, up ¼ point but said that it “traded small – their whole structure didn’t really traded that much.”

A market source at another desk said that the Franklin, Tenn.-based hospital operator’s 8% notes due 2019 were the exception to that generally quiet rule, with over $9 million moving around and the notes shooting up to 96 7/8 bid, a gain of nearly 2 points on the session. Those same bonds had plunged by 7/8 point on Friday to around the 95 bid level, with over $18 million traded then.

Dallas-based hospital operator Tenet Healthcare’s 8 1/8% notes due 2022 gained 3/8 point to end just below par on Monday, with around $14 million traded. The issue had retreated by ¾ point on Friday, on volume of over $25 million.

Tenet’s 6¾% notes due 2023 were unchanged at 93 ½ bid, on over $11 million of volume. Those notes had fallen half a point on Friday, with over 430 million changing hands.

But while those healthcare names were unchanged-to-better on Monday, a market source said that HCA “failed to follow along,” with the Nashville-based industry giant’s 5 3/8% notes due 2025 seen down 7/8 point Monday, ending at 103¼ bid, with about $8 million traded.

Concordia secured notes climb

A trader said that among the drug companies, Laval, Que.-based Valeant Pharmaceuticals International Inc.’s 6 1/8% notes due 2025 “off a little on the day” at 85¾ bid, down 1.8 point.

But he said that fellow Canadian pharmaceuticals company Concordia International Corp.’s 9% senior secured notes due 2022 were up a deuce on the day, rising 2 points to close at 80-bid, although he said there were “just a couple of [large-sized] trades.

The Oakville, Ont.-based drug manufacturer’s secured paper rose even as it announced that it will forgo paying $26 million of interest due Monday on its $735 million 7% unsecured notes due 2023 as part of its “efforts to realign its capital structure.”

“The company will use this time to continue its discussions with lenders with the goal of reaching a consensual agreement that would significantly reduce the company's debt and interest payments to create a financial foundation able to support Concordia's long-term growth,” according to a company announcement.

The payment deferral will not result in an event of default until the 30-day grace period ends.

The company said it plans to operate its business as usual.

The company has about $340 million of cash on hand as of Sept. 30, the release noted (see related story elsewhere in this issue).

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.