Toys closes week active as liquidation sale begins; Community Health volume high amid debt maneuvers

By James McCandless

San Antonio, March 23 – As equity markets closed the week on a negative note Friday, traders reported continued reluctance from investors to jump into the distressed debt market.

Toys “R” Us, Inc. saw notes active another day as it began liquidation sales on all 735 U.S. locations.

Community Health Systems, Inc. finished the week with its issues in high volume, trading amid its efforts to get its debt under control.

Sears Holdings Corp. paper continued to be traded as the week finished, becoming active since announcing the results of a private note exchange.

Frontier Communications Corp. and Intelsat SA closed the week as they started as some of the most actively traded notes of the session. Mallinckrodt plc was another healthcare name adding to Friday’s volume. Revlon, Inc. provided more volume in the already crowded distressed retail space.

Toys “R” Us begins liquidation

After receiving court approval to begin the process Thursday, reports confirmed Friday that bankrupt Wayne, N.J.-based toy retailer Toys “R” Us has started liquidation sales at all 735 U.S. locations. The company announced that it would seek liquidation after failing to find a buyer, though talks are still ongoing for selloffs of the company’s Asia and Canada divisions.

“Liquidation was supposed to start yesterday, but it was delayed for some reason,” a trader said.

The 7 3/8% notes due 2018 rose about ¼ point to close above 8¼ bid.

Community Health active

Franklin, Tenn.-based hospital operator Community Health Systems issues closed another week at the top of trading in the distressed healthcare space, according to a market source. On Wednesday, the company announced that it would facilitate refinancing of its near-term bond maturities with term revisions. It also plans to use proceeds from divestitures to repay term loan debt.

Last week, in another move to manage its debt, the company hired asset management firm Lazard, Citibank and JPMorgan Chase to advise on the matter while cautioning stakeholders on the possibility of asset sales in the coming year.

The 7 1/8% issues due 2020 gained about 2½ points to close at 79¼ bid. The 6 7/8% issues due 2022 shaved off ¼ point to close at 57 bid.

Sears active to end week

Hoffman Estates, Ill.-based retailer Sears saw its paper close the week active, traders confirmed, since being spurred Wednesday after it announced the results of a private exchange for some securities, including a portion of its 6 5/8% senior second-lien notes and $625 million 8% senior subordinated notes due 2019 in exchange for newer debt. Following that on Thursday, Standard & Poor’s lowered the company’s corporate credit rating.

The 6 5/8% paper due 2018 rose about ½ point to close just above 68½ bid. The 8% paper due 2019 held firm at 34 bid.

Volume names trade

Norwalk, Conn.-based wireline telecom name Frontier Communications closed the week where it started atop the distressed telecom space, bolstered by positive news that it recently canceled its dividend to focus on debt service.

The 7 5/8% notes due 2024 rose about ¼ point to close above 61¾ bid. The 10½% notes due 2022 fell about ½ point to close around 86½ bid. The 11% notes due 2025 dropped about 1½ points to close at 77½ bid.

Luxembourg-based satellite communications company Intelsat provided more volume in distressed telecom.

The Intelsat Jackson SA 5½% issues due 2023 lost about ¼ point to close just above 80 bid. The 7¼% issues due 2020 stayed level at 92 bid.

Britain-based drug maker Mallinckrodt continued its run of high volume in distressed healthcare.

The 4¾% paper due 2023 traded down about 3¾ points to close just under 76¾ bid.

New York City-based cosmetics retailer Revlon was actively traded in the retail sector.

The 5¾% notes due 2021 fell about ¼ point to close at 76½ bid. The 6¼% notes due 2024 edged up ¼ point to close at 61¼ bid.

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