Valeant rebounds after subpoena-related slide, oils firm with crude prices; AMD gains despite losses

By Paul Deckelman

New York, Oct. 16 – A general upturn in the junk bond market on Friday lifted a number of issues that distressed-debt traders had been watching.

One was Valeant Pharmaceuticals International, Inc., whose bonds slid badly on Thursday on the news that the acquisitive specialty drug manufacturer had been sent subpoenas by federal prosecutors in two districts seeking information on its controversial drug-pricing policies and its patient-assistance program that helps patients pay for the expensive medication.

Friday was also a better day for oil and natural gas companies such as California Resources Corp., Berry Petroleum Co. and Chesapeake Energy Corp.

The sector was seen having gotten a boost from the first upturn in crude oil prices this week.

Advanced Micro Devices Inc. bondholders apparently shrugged off any worries about the computer-chip manufacturer’s third-quarter slide into the red versus its year-ago profit, focusing instead on news of a Chinese joint venture that will add a sizable chunk of welcome cash to AMD’s coffers.

Traders in the convertibles market meantime saw pressure on some issues on Friday, including clean-energy company SolarCity Corp. and railroad equipment manufacturer Greenbrier Cos. Inc. Ahead of Monday’s scheduled earnings release, Helix Energy Solutions Group Inc.’s converts were also seen off.

Valeant on the rebound

Traders saw Friday’s generally firm market tone helping some of the notes that had been seen under pressure during Thursday’s session.

One such name was Montreal-based drug manufacturer Valeant, one of Thursday’s biggest losers.

A trader said that “the bonds gained back some ground” that they had lost on Thursday, with the company’s 6 1/8% notes due 2025 up 1¼ points to the 96 bid level.

A second trader said that the issue “seemed to be one of the popular ones,” rising 1 3/8 points to a 95½ to 96½ bid context.

Yet another trader said that the bonds firmed by more than 1 point to end at 95 7/8 bid on volume of over $21 million.

One of the traders also quoted Valeant’s 5 7/8% notes due 2023 up 1 point on the day at 96 bid, although he said that there was “not a lot of volume in the credit.”

On Thursday, the Valeant bonds – which had recently fallen from levels around par to gyrate in the 90s after Congressional Democrats talked about issuing a subpoena to force the company to come before Congress to explain its pricing policies on some of its medications – fell anew, pushed lower by the news that the federal prosecutors in Boston and New York had issued subpoenas seeking information.

The 6 1/8% notes had slid nearly 1½ points on trading volume of over $86 million.

The 5 7/8% paper had fallen 1½ points, with over $48 million traded.

Energy issues better

Energy credits that have recently been under pressure pushed higher on Friday. They got a boost as crude oil prices broke out of their recent doldrums, with West Texas Intermediate for November jumping 88 cents to $47.26 per barrel.

Among the sector gainers were California Resources’ 6% notes due 2024, with a trader quoting them around 69 to 70 – well up from Thursday’s 66¾ to 67½ levels.

Other oilers enjoying a rebound included Chesapeake Energy, whose 6 5/8% notes due 2020 gained 1¾ points, ending at 76½ bid.

Sector peer Berry Petroleum’s 6¾% notes due 2020 firmed by 2¼ points to end at 40 bid.

AMD catches a bid

Bond investors were apparently not particularly fazed by Advanced Micro Devices’ late-Thursday report that it had lost $197 million during the third quarter – a sharp reversal from its year-earlier profit.

The 25 cents per share loss that it posted was wider than the roughly 10 or 11 cents per share that analysts had been expecting.

However, its 7½% notes due 2022 jumped 4 5/8 points on Friday to 68 5/8 bid on volume of more than $10 million.

A second trader pegged its 7% notes due 2024 in a 67 to 68 bid context, while its 6¾% notes due 2019 last traded at 73½, both issues up around 3 points on the day, “so yeah, those are feeling better.”

Analysts noted that while the company lost more money than expected, its $1.06 billion of revenues did beat expectations.

They also noted the announcement by the Sunnyvale, Calif.-based semiconductor maker of plans for a joint venture with Chinese manufacturer NFME – with the sale of some AMD facilities expected to bring the company $371 million of much-needed cash.

Some converts in retreat

Despite generally higher stocks, traders in the convertibles market saw some pressure on paper there in certain sectors.

The shares of SolarCity were down 5%, for example, and the convertibles of the San Mateo, Calif.-based clean energy company were lower by a few points on an outright basis. The SolarCity 1.625% convertibles traded actively at about 75.375 bid, 75.875 offered, which was down from 77.5 bid, 78 offered previously, according to Trace data.

Also nearly 5% lower were the shares of Greenbrier, and its convertibles were indicated lower. The 3.5% convertibles of the Lake Oswego, Ore.-based railcar company were indicated at 116.5 from 120 previously. Shares fell to $36.51, which was down $1.78, or 4.7%.

In the absence of earnings reports on Friday, market players were meantime looking ahead to reports due out in the week ahead.

Helix Energy Solutions was expected to report its third quarter results on Monday. Shares of the Houston-based offshore oil service company fell nearly 10% on Friday, but the Helix 3.25% convertible changed hands at the high end of its recent range and then about a point lower at 81.

The Helix common stock was down 56 cents, or 9.6% to $5.30.

-Rebecca Melvin contributed to this review

© 2015 Prospect News.
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