Amid hundreds of millions of illiquid bonds issued for a Maryland cancer treatment center that is in default on its payments, roughly $6 million of the paper recently traded for five cents.
"That trade is just stunning," said a high-yield buyside veteran. "Talk about a wipeout."
The Maryland Proton Treatment Center is one of several proton treatment centers financed by unrated municipal bonds that's facing challenges. Nearly all of the Maryland center's debt hasn't changed hands for years amid missed bond payments and annual audits that raise doubts about
But in a burst of activity on April 23,
"That does indicate a very low recovery value considering the amount of medical equipment involved and the building itself," said another high-yield investor who does not hold the bonds.
The bonds appear to be a subordinate or junior tier, so it's not clear what, if any, collateral backs the bonds. No offering documents are posted on EMMA.
The bond's most recent trade before April was in July 2020 when just under $2 million of the sold for 60. The bulk of the center's senior and junior bonds languish untraded on the secondary market. The most recent trade, in May 2024, was senior bonds due in 2038 with 6.25% coupon that sold for 35 cents. Some of the debt, like $3.5 million of subordinate zero-coupon bonds due in 2055, have never traded.
The Maryland proton center is among the oldest proton treatment centers, the first source said. "It's been restructured already," they said. "If that one doesn't make it, then some of the others will really be in trouble."
Proton therapy more precisely targets radiation to tumors, with less damage to surrounding tissues than other radiation therapies. The treatment is expensive and not always covered by insurance. The centers rely on patient revenue for bond payments and many have struggled to attract enough patients.
The Maryland Proton Treatment Center originally opened around 2015 with the issuance of $363.8 million of unrated bonds. After struggling to build patient volume, the center restructured its debt in 2018 with a $277.4 million tax-exempt bond issue through Wisconsin's Public Finance Authority.
Several high-yield bond buyers said they have shied away from the sector as too risky. Robert Lind of Lind Capital Partners LLC is one of those investors.
"We could never get comfortable with the sector or the individual projects for the challenges they faced," Lind said on a LinkedIn post that referred to a
"Additionally, we struggled with the concept of 30-year debt issued to finance current medical technology, which could be outdated and obsolete in an instant with technological advancements."
