Avaya higher on reorganization plan filing; health care largely unchanged following HCA’s forecast; Hertz up

By Colin Hanner

Chicago, April 17 – Last week’s lull in the distressed debt market continued on Monday, traders said, with the quietness of the holiday weekend extending into a session dominated by bonds staying close to where they started.

“There just wasn’t really that much trading at all,” a trader said, adding that the holiday weekend, paired with vacations, has kept markets stagnated. Plus, the past week has been host to a “lot of geopolitical risks, so people aren’t jumping back into it very quickly,” the trader said.

Santa Clara, Calif.-based Avaya Inc. was the most active name in the distressed sphere, a trader said, rising after it filed a plan of reorganization and related disclosure statement Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

Health care stocks slid after Hospital Corporation of America announced a dismal forecast of its first quarter earnings, though health care bonds on the whole were largely unaffected, a trader said.

Quorum Health Corp. was unchanged, while Tenet Healthcare Corp. saw about a round-number loss on the session.

And Hertz Global Holdings, Inc. was “trading, but it was relatively unchanged,” on the session, a trader said.

Avaya up on plan

Avaya’s 7% notes due 2019 were up “as much as 3 points” during intraday trading before settling at 81½, up 1 point on the session after filing a reorganization plan.

“I don’t know if some of it was fast-money, or short-covering,” a trader said of the business collaboration and communication service company’s movement, adding that it went as high as 83½ before settling at an 81½ handle.

According to a company news release, the reorganization plan outlines a path to significantly reduce Avaya’s pre-filing debt, which would strengthen its balance sheet, improve financial flexibility and position it for long-term success.

Under the proposed plan, which Avaya said will continue to evolve as it works toward creditor consensus and confirmation, the company’s pre-filing debt will be reduced by more than $4 billion.

Avaya said its restructuring will be achieved through a debt-for-equity exchange, in which some secured creditors would acquire 100% of the reorganized company’s equity. In addition to a portion of the equity, holders of cash flow credit facility secured claims and first-lien notes claims will receive a share of cash proceeds from the syndication of new debt or a share of the new debt if it is not fully syndicated.

Health care largely unaffected

“Health care reported some earning weakness, but it really didn’t affect it that badly,” a trader said, referring to HCA Holdings’ below-forecasted earnings and revenue for first quarter figures. The company cited government insurance over employer plans as a stranglehold to profit.

Though stocks of other health care-focused companies were down as a result, bonds did not seem to feel the same effects.

Quorum Health’s 11 5/8% notes due 2023 – up 3 points after fourth quarter results on Friday – were unchanged at 89¼. After close, the company announced it launched a $400 million exchange offer for the 11 5/8% notes.

And Tenet Healthcare’s 6¾% notes due 2023 were down 7/8 point to 96, a trader said.

Mixed on the airwaves

San Antonio media and entertainment company iHeartCommunications, Inc.’s 9% notes due 2021 were up ½ point to 77½.

Telecommunications company Charter Communications Inc.’s 5 1/8% notes due 2027 were up 1/8 point to par.

In energy

Cleveland, Ohio-based iron ore producer Cliffs Natural Resources Inc.’ 5¾% notes due 2025 were down ¼ point to 94, a trader said.

Houston-based offshore driller Atwood Oceanics, Inc.’s 6½% notes due 2020 were unchanged at 89¼.

And Houston-based electric provider Dynegy Inc.’s 7 3/8% notes due 2022 were down ¾ point to 96.

Distressed wrap-up

One of the most active issues of the day was Hertz Global’s 7 3/8% notes due 2021, which a trader saw up ¼ point to 96¼.

And Intelsat Jackson Holdings SA’s 7¼% due 2020 were up 3/8 point to 92 5/8.

Caroline Salls contributed to this review

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