Hospitals continue gains from Obamacare dismantling talk; retailers see bad holiday sales; E&P up

By Colin Hanner

Chicago, Jan. 5 – Vibrant activity in the distressed market continued to swirl around healthcare companies on Thursday, a day after steep increases were felt across the board due to measures seeking to dismantle the Affordable Care Act, and activity was up all around, traders said.

“We’re back to a pretty active, full-session high-yield day,” a trader said.

Community Health Systems, Inc. saw its second-straight session of multiple-point increases.

“Hospitals continue to crank higher,” a trader said.

Pharmaceutical company Valeant Pharmaceuticals International, Inc. followed closely with several upward moves of its own.

Retailers Macy’s, Inc., Kohl’s Department Stores, Inc. and Sears Holdings Corp. all predicted a worse-than-expected holiday season on Thursday, and a contagion – albeit slightly smaller – spread to Neiman Marcus Groups, Inc. and Nine West Holdings, Inc. on the increasing worries surrounding brick-and-mortar stores’ long-term sustainability.

In exploration and production, Bonanza Creek Energy, Inc. remained about where it finished after Wednesday’s steep climb due to the company filing a pre-package Chapter 11 filing.

Vanguard Natural Resources, LLC saw a rise in its distressed securities after the company said it might not be able to make a $37.5 million deficiency payment on its senior secured reserve-based credit facility on Feb. 2.

Other distressed energy names reflected the continued gains in oil future prices, including California Resources Corp. and Transocean Ltd.

Healthcare stays on the tracks

A day after Republican legislators pushed forward a budget bill that could effectively diminish public spending in health care, hospital and pharmaceutical companies continued to build on gains seen on Wednesday.

Healthcare and pharmaceutical companies may be hinging on some of the policies of an incoming Donald Trump White House, which has promised to at least strip components of the Affordable Care Act, and at most dismantle it completely.

And, some companies in the healthcare sector are banking off some of that coming true.

That was especially the case for Community Health, which saw a 3½-point gain in its 8% notes due 2019, which finished with an 88¼ handle on “heavy volume,” a trader said.

Its 6 7/8% notes due 2022 were up 2 points to 75.

Valeant Pharmaceuticals slowed down its gains on Thursday, but the 6 3/8% notes due 2022 were up 2 points to 89¼, a trader said, mirroring similar gains by its other securities made Wednesday.

The 5 3/8% notes due 2020 were up 1 point to 88, and the company’s 6 1/8% notes due 2025 were up 5/8 point to 78 1/8.

A market source said Valeant’s 7½% notes due 2021 were up 1½ points to 87½.

Endo Finance Co. (Endo Pharmaceuticals plc) saw a 1-point increase in its 6½% notes due 2025, which finished at 85¼, a trader said.

And remaining unchanged on the day were Concordia International Corp.’s 7% notes due 2023, which retained a 33 handle.

Retailers on the downswing

The holidays came and went again this season, but on Thursday some retailers showed how the sluggish sales from the period may have caused some irreparable damage.

Macy’s will cut tens of thousands of jobs and dozens more stores in the near future, the company announced Thursday, and Kohl’s echoed a similar downturn in holiday sales.

The shift to online sales, or the lack thereof, has affected many brick-and-mortar stores which have long relied on foot-traffic and in-store sales. In the midst of the holiday shopping season last month, J. Crew Group began preparing for a debt restructuring.

For the session, Neiman Marcus Group’s 8% notes due 2021 were down 3/8 point to 69¾.

And Nine West Holdings’ 8¼% notes due 2019 were down ¼ point to 21½, a trader said.

Going against the tide were Claire’s Stores, Inc.’s 9% notes due 2019, which were up for the second-straight day.

A trader said they were up almost 1 point to 52 7/8.

Bonanza, and other E&P’s firm

After rocketing to a near-90 handle on Wednesday, Bonanza Creek’s 5¾% notes due 2023 were up ¾ point to 89½.

Its 6¾% notes due 2021 were up ½ point to 89, a market source said.

The company announced it had made a pre-packaged Chapter 11 bankruptcy filing a day prior.

Oil future prices continued to rise on a falling greenback, declining crude oil stockpiles and increased trust in the Organization of Petroleum Exporting Countries’ ability to monitor production limits with the most recent supply-cut deal.

Several distressed E&P names followed the advances.

California Resources’ 8% notes due 2022 were up ¼ point to 91½, a trader said.

Driller Transocean Ltd.’s 6.80% notes due 2038 were up 1 to 82½.

Denbury Resources’ 6 3/8% notes due 2021 were up ¾ point to 94¼, a market source said, adding that MEG Energy Corp.’s 7% notes due 2024 were up ½ point to 93½.

Vanguard up on uncertainty

After announcing it may not be able to make a $37.5 million deficiency payment on its senior secured reserve-based credit facility on Feb. 2, Vanguard Natural Resources’ 7 7/8% notes due 2020 were up nearly 4 points to 62, a market source said.

In a regulatory filing on Thursday, the Houston-based oil and gas company said it managed to make the Jan. 3 payment through a monetization of substantially all of its commodity and interest rate hedges with net proceeds totaling $11.7 million on Dec. 19, combined with $6 million of proceeds from recent asset sales and $19.8 million from cash on hand. But it did not believe that current cash flow would be enough to make the next payment.

Vanguard said it is actively considering all options, including continuing talks with potential new investors, as well as with existing creditors about longer-term balance sheet solutions.

Electricity movers

Akron, Ohio-based FirstEnergy Corp.’s 6.8% notes due 2039 were up ¾ point to 37, and its 6.05% notes due 2021 were down ½ point to 40¼.

Houston-based Dynegy Inc.’s 7% notes due 2018 were up ½ point to 36.

Talen Energy Supply LLC’s 6½% notes due 2025 were up ½ point to 79½, a trader said.

Distressed round-up

Caesars Entertainment Inc., which one trader called one of the most-active names of the day, saw a ¾-point gain in its 10% notes due 2018, which finished at 76.

Intelsat Luxembourg Holdings SA extended the gains in its 7¾% notes due 2021, which were up 1¼ points to 36½.

Technology company Avaya Inc.’s 7% notes due 2019 were “off,” a trader said, down 1¾ points to 86.

And iHeartCommunications, Inc.’s 14% notes due 2021 were down 1¼ to 36¾.

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