The loan-only credit default swaps on HealthSouth Corp. saw the most movement in the LCDS market last week, tightening about 30 to 40 basis points to move to around 210-215. Its credit default swaps tightened about 50 basis points and were quoted as low as 195-200, a portfolio manager said. A dealer said there is no specific reason why it was trading, except that there may be some residual effect from the news the company may spin off or sell some of its assets.
On Aug. 14, the company announced it may spin off or sell its surgery center and outpatient rehabilitation divisions, according to a filing with the Securities and Exchange Commission. The Birmingham, Ala.-based company also announced it had hired Goldman Sachs to assist with the process, which is expected to take about 12 months.
Some in the market thought spreads would widen as investors traded some HealthSouth exposure to try and make room for the upcoming HCA term loan. "Some people expected it would come under pressure, but it seems like it is the opposite; the loan traded up and the CDS tightened," the portfolio manager said.
JPMorgan, Citigroup and Merrill Lynch lead the syndication of the $3.85 billion refinancing that launched in February (CIN, 2/13). The company's term loan "B" has slowly been trading up since the announcement, trading at 99.888-100.313 Aug. 14 and trading at 100.288-100.713 last Wednesday, according to Markit. A HealthSouth spokesman declined to comment about trading levels.