Dealers played a cat-and-mouse game with as much as $40 million of Integrated Health Services' bank debt last week, moving its price up about seven points. There were several small trades and reportedly a larger-sized sale of about $20 million, but dealers differed over amounts and timing to the point where some questioned whether the paper was actually changing hands. What is certain is that the bank debt of the bankrupt health care company was getting a lot of attention and prices moved up to about 38. Dealers attributed the activity to an improving industry, but even among its peers IHS got the most attention.
Joseph Bondi, chief restructuring officer at Integrated Health, had no comment on the trades or whether the company is pulling out of Chapter 11 bankruptcy soon, affecting levels. "We have not filed a plan of reorganization," he said. In a Securities and Exchange Commission filing this month, the company announced new management which has "extensive experience in the field of restructuring and reorganization."
Early in the week two dealers confirmed the report of a large trade at 37 1/2 range, but another dealer called it "a fishing expedition." He added that players were probing the market to try and find a level by talking up hypothetical trades. A piece did reportedly move at that level later in the week.
He declined to elaborate or give his take on why IHS specifically was so coveted. "The whole health care sector is trading up. Mariner [Post Acute Network] went from 37 1/2 at the end of last year to 45 now," he said. One market watcher explained that Integrated Health's subsidiary, RoTech Medical, which handles home health care, has gone up in value. "I don't think Integrated Health's core business has improved, but [home health care] has been bid up," he said. "So anyone in the bank debt will be covered by that. If IHS were to sell RoTech, [anyone holding the debt] would get more money."
Another dealer added, "Health care is more defensive, meaning people still get sick in a bad economy. Plus they're further into their restructuring," he said, adding that he believes the company will pull out of Chapter 11 soon. Integrated Health has moved up considerably from levels late last year, which hovered around 30. Integrated Health has a $2.15 billion credit facility that breaks down into a $1 billion revolver, a $750 million term loan "B," and a $400 million "C" tranche. Salomon Smith Barney and TD Securities are the lead arrangers, according to Capital DATA Loanware. A bank spokesman at Salomon declined to comment, while a spokesman at TD Securities did not return calls.