Windstream, Uniti bonds gain on exchange offer; Bombardier paper eases; Toys trades up

By Paul Deckelman

New York, Oct. 19 – Windstream Holdings Inc. – lately the target of investor default claims – announced an exchange offer for several series of its notes.

That pushed that paper higher, along with the notes from former Windstream subsidiary Uniti Group Inc.

Canadian aircraft manufacturer Bombardier Inc.’s recently high-flying bonds were seen by traders to have lost some altitude but they were still up from where they had been before jumping higher earlier in the week on the news that it will partner with European aerospace giant Airbus on Bombardier’s C-Series of passenger jetliners.

Toys ‘R’ Us Inc.’s 2018 notes – which zoomed by as many as 15 points earlier in the week on talk of a possible initial public offering of the bankrupt retailer’s booming Asian business only to give back some of those gains on Wednesday – were seen rebounding nicely from that drop on Thursday, in active trading.

Hospital names such as Community Health Systems, Inc. and HCA Inc. were mixed on the session amid continued uncertainty about changes in the healthcare systems in the United States.

Windstream a winner

Windstream Holdings paper “was very active,” one of the traders said, seeing the Little Rock, Ark.-based telecommunications company’s various bonds up by anywhere from 1 to 3 points, “depending on where in the capital structure they are.”

Those notes moved up amid the news that Windstream announced exchange offers for four series of notes issued by its Windstream Services LLC subsidiary – the company’s nearly $651 million of 7¾% senior notes due 2020, its $809 million of 7¾% senior notes due 2021, its $441 million of 7 ½% senior notes due 2022 and its more than $343 million of 7½% senior notes due 2023 (see related story elsewhere in this issue).

“It was positive for the whole structure,” the trader said.

“The bonds were notably active on that exchange offer,” a second trader agreed.

He noted that the company “is trying to combat” recent claims by a large noteholder that Windstream was in default of its bond indentures because of its transaction two years ago spinning off some of its properties into a new communications-oriented real estate investment trust, also based in Little Rock, known as Communications Sales & Leasing, which was later renamed Uniti Group. The bondholder charges that Windstream engaged in a sale and leaseback transaction with the new entity – when the bond indentures clearly limit the kind of transactions it can enter into.

Windstream, for its part, says the claims are without merit, denying that REIT transaction was prohibited.

“All of the bonds were up,” the second trader said, “except the 6 3/8% notes due 2023, the bond being exchanged into” – the company is offering new 6 3/8% notes in exchange for the shorter duration existing bonds.

He called the bonds up “2 to 4 points, depending on the flavor. Bonds that were in the lower 70s are now in the mid-70s. Bonds that were in the mid-70s are in the high 70s,”

Windstream’s 7¾% notes due 2020 were seen by a market source to have firmed by nearly 1 point to end at 89¼ bid on volume of more than $39 million, making it the busiest purely junk issue of the day.

Its 7¾% notes due 2022 jumped 3½ points to 78 bid, with over $26 million having changed hands.

The company’s 7¾% notes due 2021 improved by nearly 4 points on the day to 80¼ bid on volume of over $19 million.

In contrast, he saw the 6 3/8% notes due 2023 little changed on the day at 74 bid, with more than $11 million of turnover.

Uniti along for the ride

One of the traders also noted that “since Uniti is intertwined with Windstream,” it was also active on the day “on the back of the Windstream exchange news.

“The bonds rallied a bunch, but then they came off their intraday highs.”

For instance, he said that Uniti’s 8¼% notes due 2023 zoomed by “1 or 2 points to above 98 but then they came back in” to end around 96 bid, up ¾ point on the day, on volume of over $27 million.

He saw the REIT’s 7 1/8% notes due 2024 get as good as 93½ bid early in the session, “but they were volatile,” losing most of those gains and ending at 91½ bid, just a ½ point gain. Volume was more than $24 million.

Uniti’s 6% notes due 2023 followed a similar trajectory before ending up ¼ point on the day at 100½ bid, on more than $15 million of volume.

Toys trades up

A trader said that Toys ‘R’ Us’ 7 3/8% notes due 2018 “were back up a little bit,” seeing the notes closing at around the 41 mark.

At another desk, a market source pegged the bankrupt Wayne, N.J.-based specialty retailer’s issue at 42½ bid, calling those bonds up a deuce on the day, with over $10 million having moved around.

The Toys ‘R’Us issue had jumped by 15 points on Tuesday to around 43 bid, from its prior levels in the upper 20s.

The bonds had shot up on news reports indicating the company was considering raising capital by having an initial public offering of its burgeoning and profitable Asian business.

The Asian unit was not included in the company’s recent U.S. bankruptcy filing.

After notching those hefty one-day gains, the issue had retreated on Tuesday on profit-taking traders said, falling back down to around the 40 bid level.

Bombardier bonds off

Elsewhere, a trader said that Bombardier’s bonds – which had jumped as much as 6 points pretty much across the board earlier in the week on the news that the company will partner up with Airbus on producing Bombardier’s new C-Series 100 to 150 passenger jets – were seen in retreat on Thursday.

“They were off a little, after being up 5 or 6 points two days ago,” he said, “down ½ to 1 point on a few names, so there was a little pullback on that.”

The Montreal-based aircraft maker’s 6 1/8% notes due 2023 were seen down ½ point at 102½ bid as over $19 million changed hands.

Its 6% notes due 2022 lost ¾ point on the day to close at 100¾ bid as over $15 million traded.

Bombardier’s 7½% notes due 2025 landed at 106¾ bid, off ¾ point, on volume of over $13 million.

Hospital names mixed

Traders said the hospitals sector remained busy amid all of the back-and-forth coming out of Washington on possible changes to America’s Affordable Care Act, commonly known as Obamacare.

Nashville-based hospital operator HCA’s 5 7/8% notes due 2026 edged up by ¼ point to 106¼ bid on volume of over $15 million, while its 5 3/8% notes due 2025 gained 1 full point, ending at 104½, with over $13 million traded.

Franklin, Tenn.-based sector peer Community Health Systems’ 8% notes due 2019 were seen losing ¼ point, ending at 97 bid, with over $13 million traded.

Its 5 1/8% notes due 2021 were likewise down around ¼ point, at 98¼ bid, as some $10 million traded.

But its 7 1/8% notes due 2020 shot up by more than 1¾ points to go home at 88 13/16, also on about $10 million of turnover.

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