Bausch Health offering eyed; Mallinckrodt skyrockets; Endo, Teva gain; Tupperware nosedives

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 25 – Coronavirus-induced volatility again sidelined the domestic high-yield primary market, which was silent as the sell-off in risk assets intensified on Tuesday.

While the active forward calendar is thin, Bausch Health Americas Inc. was heard to be on the verge of announcing a two-tranche $3.25 billion megadeal.

Meanwhile, the secondary space was volatile on Tuesday with the market opening the day with a slight gain only to drop another ¾ to 1 point by market close.

While the sell-off intensified on Tuesday, it remained orderly with panic yet to set in, a market source said.

Mallinckrodt plc’s junk bonds were the bright spot of Tuesday’s session with the capital structure jumping 10 to 20 points following an opioid settlement that may shield it from future liability and an exchange offer for its soon-to-mature notes.

Teva Pharmaceutical Industries’ and Endo International plc’s junk bonds gained in sympathy.

Tupperware Brands Corp.’s 4¾% senior notes due 2021 saw the largest decline in junkbondland on Tuesday after the fallen angel announced an accounting probe that would delay its earnings report.

Volatility sidelines new issues

Volatility related to coronavirus sidelined the dollar-denominated corporate bond markets on Tuesday, sources said.

The rout in the stock market continued. Since the beginning of the week the S&P 500 has fallen 6.28%.

In the high yield bond market, the dealers would prefer to see the capital markets regain stability and retain it for the course of at least one full session before bringing a new deal, a syndicate banker said on Tuesday.

Notwithstanding the volatility, a thin new issue calendar features at least two deals on the road in America and Europe – deals announced prior to the onset of the present volatility.

Advantage Solutions Inc. is holding a roadshow for $1.145 billion of notes: $345 million 6.5-year senior secured notes with initial talk mid-to-high 6% area, and $800 million seven-year senior unsecured notes with initial talk high 10% area.

And Netherlands-based geo data services provider Fugro NV was scheduled to start a roadshow on Monday for a €500 million offering of five-year senior secured notes.

Meanwhile, the market awaits the formal announcement of $3.25 billion of senior secured notes (Ba2/BB/BB) from Bausch Health Americas Inc.

The two-part deal is expected to come in tranches of eight-year notes with initial guidance in the low 4% area, and 10-year notes with initial guidance in the mid-to-high 4% area, a bond trader said (see related story in this issue).

Mallinckrodt skyrockets

Mallinckrodt’s junk bonds skyrocketed on Tuesday following news of a settlement for the drug maker’s role in the opioid epidemic.

In addition to the settlement, Mallinckrodt announced an exchange offer for its 5¾% senior notes due 2022, which sent the notes soaring.

The 5¾% notes were the most active in the secondary space on Tuesday. They jumped 23½ points to close the day at 82, according to a market source.

The notes saw more than $56 million in reported volume.

Mallinckrodt’s 5 5/8% senior notes due 2023 jumped 20 points to close Tuesday at 69 with more than $42 million in reported volume.

The 5½% senior notes due 2025 rose more than 10 points to 56¾.

The soon-to-mature 4 7/8% notes due April 15 rose more than 8 points to 94.

Confidence was growing that the 4 7/8% notes will be taken out at par at their maturity, a market source said.

Mallinckrodt agreed to a $1.6 billion settlement proposal on Tuesday that would resolve thousands of lawsuits related to its role in the opioid epidemic, Reuters reported.

The proposal involved its generic drug business filing for bankruptcy.

The settlement was lower than expected and may shield the company from future claims, according to a market source.

Following the settlement, Mallinckrodt announced an exchange offer for its 5¾% notes due 2022 for new 10% second-lien notes due 2025.

If the amount of new notes issued in the exchange is less than $610,304,000, Aurelius Capital, Franklin Advisers and Capital Research agreed to exchange their 5 5/8% senior notes due 2023 for an amount that would equal the excess.

Mallinckrodt’s longer duration notes are expected to continue to rally, a market source said.

Opioid makers

Endo International and Teva, two drug makers that also face significant liability from opioids, also saw their junk bonds rally on the heels of Mallinckrodt’s settlement proposal.

Endo’s 6% senior notes due 2025 rose 2½ points to 80½ with about $23 million in reported volume, according to a market source.

Teva’s 7 1/8% senior notes due 2025 rose 2 points to 108¾. The 6% senior notes due 2024 were also up 2 points to 104½.

Tupperware tanks

Tupperware’s 4¾% senior notes due 2021 tanked on Tuesday after the company announced that it would delay releasing its earnings report due to an accounting probe of one of its units.

The 4¾% notes dropped almost 9 points in high-volume activity to close the day at 89 5/8, according to a market source.

The bonds saw more than $40 million in reported volume during Tuesday’s session.

Tupperware announced that it was investigating accounting of the accounts payable and accrued liabilities at its Fuller Mexico beauty business, which would result in a delay to its earnings report.

However, the company did provide guidance for 2020 which reflected a further slump in sales of between 9% to 11%.

Due to the outlook, Tupperware announced that it will need to amend the existing leverage ratio covenant on its $650 million credit agreement to avoid the potential acceleration of debt, the company said in a press release.

Tupperware was one of 2019’s fallen angels.

Indexes extend losses

Indexes extended their losses on Tuesday.

The KDP High Yield Daily index dropped another 14 points to close Tuesday at 71.05 with the yield now 5.12%. The index tumbled 39 bps on Monday.

The ICE BofAML US High Yield index fell another 23.9 bps with the year-to-date return now 0.224%. The index sank 73.1 bps on Monday.

The CDX High Yield 30 index dropped another 60 bps to close Tuesday at 106.77. The index plummeted 141 bps on Monday.

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