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Community Health High Yield, Leveraged Loan Debt Swoons as Earnings Underwhelm

Community Health bonds fell sharply in late afternoon trading Wednesday after the hospital operator rolled out preliminary second-quarter earnings that underwhelmed analyst expectations.

Community Health 6.875% notes due 2022 were the most actively traded, falling 3.5 points, to 86.5, according to MarketAxess. Over in loans, the issuer’s term loan H dipped about three quarters of a point on the day, to 99.75/100, sources said.

Adjusted EBITDA for the quarter is expected to clock in at roughly $435 million, according to a company release, or nearly 15% shy of analyst expectations of $510 million, based on consensus data provided by S&P Global Market Intelligence.

“The lower than anticipated results were primarily caused by lower than expected volume and the resulting lower net operating revenues,” the company noted in the release. “The results were also impacted by increases in medical specialist fees, purchased services and information systems expense.”

Community Health expects to book net operating revenue for the quarter of about $4.14 billion, compared with $4.59 billion in 2Q16.

Net cash provided by operating activities is expected to be about $261 million, and roughly $503 million for the first half of the year. This compares with $338 million and $632 million for 2Q16 and 1H16, respectively.

Community Health bonds had climbed sharply over the past few weeks as repeal efforts encountered enough resistance from GOP senators to potentially dispel the damaging potential impact on rural facility operators.

But the bonds shed gains this week as Senate Republicans moved to open a debate on at least a scaled-down version of repeal-and-replace legislation for the extant Affordable Care Act.

Franklin, Tenn.–based Community Health (NYSE: CYH) is an operator of general acute-care hospitals and outpatient facilities in communities across the U.S. — James Passeri

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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