Walter Investment bonds drop on restructuring news; Community Health, Frontier stay busy post-earnings

By Stephanie N. Rotondo

Seattle, Aug. 2 – A distressed debt trader said Walter Investment Management Corp. was the nom du jour on Wednesday.

The company’s bonds were pressured during the midweek session, as investors reacted poorly to word of a restructuring agreement.

Away from Walter, Community Health Systems Inc. and Frontier Communications Inc. remained somewhat busy following the companies’ earnings results.

Both entities reported the numbers after Tuesday’s close.

For its part, Community Health posted mixed earnings. The company’s debt weakened in response.

As for Frontier, it came out with earnings that missed expectations. However, its bonds were edging higher.

Elsewhere in the distressed space, California Resources Corp.’s 8% second-lien notes due 2022 continued to lose ground.

A trader said the bonds dipped 1¼ points to 62. At another desk, the paper was seen at 62¾ bid, off nearly a point.

Walter gets whacked

Walter Investment’s debt took a tumble on Wednesday after the company announced a restructuring support agreement.

A trader said the 7 7/8% notes due 2021 declined 5 points to 53 in “active” trading.

Elsewhere in the company’s capital structure, a source called the 4.5% convertible notes due 2019 down about 13 points, trading just south of 21.

But another source said the convertibles were off even more, closing at 16.5.

Walter’s equity meantime dropped 32.1 cents, or 38.862%, to 50.5 cents.

On Tuesday, Walter said it had inked a restructuring support agreement with certain lenders. Additionally, it had secured waivers from certain lenders and noteholders.

Part of the proposal will include extending a credit agreement’s maturity to June 2022.

The company said it plans to take the next 30 days to secure a restructuring agreement with holders of its senior notes.

Community Health trades off

In Community Health, a trader saw the 6 7/8% notes due 2022 falling 1½ points to 83½.

The paper had also been weaker in the previous session, ahead of the earnings release.

For the second quarter, net loss came to $137 million, or $1.22 per share. That compared to a loss of $1.43 billion, or $12.91 per share, the year before.

The company had incurred a $1.38 billion operational loss the previous year.

Operating revenue declined 9.7% to $4.14 billion.

On an adjusted basis, the company reported a loss of 25 cents per share.

Analysts had forecast a loss of 1-cent per share, on revenue of $4.11 billion.

Frontier firms again

While Community Health continued to be in decline, Frontier debt continued to climb higher.

A trader said the 7 5/8% notes due 2024 added almost a point to close at 82¾.

For the quarter, Frontier reported an adjusted loss per share of $1.10 on revenue of $2.3 billion.

Analysts had expected a loss per share of 91 cents on revenue of $2.31 billion.

The company also lowered guidance for the year.

Lindsay Pacia, an analyst at CreditSights, called the earnings “uninspiring.”

“Frontier’s uninspiring earnings did little to instill confidence in the company’s long-term narrative,” she wrote in a research note. “Operating results continue to be weak on the back of sub losses, but Frontier has cleared a runway for the time being.”

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