Distressed bond trading muted as holiday nears; Valeant bonds improve on takeover news

By Stephanie N. Rotondo

Seattle, May 27 – With a long weekend on the horizon, trading in the distressed debt market was sparse on Friday.

“There was very, very limited volume,” a trader said.

The trader did note that new high-yield issues – such as Teck Resources Ltd.’s $1.25 billion two-tranche senior notes offering priced Thursday – were busier than not.

Even a speech from Janet Yellen, Federal Reserve chairman, at Harvard later in the day did little to keep market players in their seats.

Yellen was scheduled for a sit-down with Harvard economics professor Greg Mankiw at 1:15 p.m. ET. Market watchers were hoping the Fed head would give further clues as to whether a rate hike is coming sooner than later – especially after the Commerce Department upwardly revised first-quarter GDP.

Yellen indicated that a rate increase was likely on the table in the next few months.

Last week, minutes from the last policy meeting of the central bank indicated that an interest rate increase was in the cards for June or July, assuming the economy continues to improve.

But as for the day’s distressed dealings, Valeant Pharmaceuticals International Inc. topped the trading activity, as it was reported that the troubled drugmaker had rejected a takeover offer just weeks before its new chief executive officer, Joseph Papa, took office in April.

The news gave the company’s debt – and equity – a boost.

Aside from the Valeant activity, trading “really dropped off,” a trader said.

With oil prices retreating from the $50 mark, struggling oil and gas names were also coming in.

A trader said Chesapeake Energy Corp.’s 8% second-lien notes due 2022 dipped a point to 79½.

Oil prices were waning as investors were taking profits from the commodity’s recent rally. Additionally, a stronger dollar was playing a role.

Valeant up on takeover news

Valeant Pharmaceuticals rejected a joint takeover bid from Japanese company Takeda Pharmaceutical and TPG Capital, the Wall Street Journal reported late Thursday.

Come Friday, investors responded by pushing up both the debt and equity.

A trader said there were “tons of trades” in the 6 1/8% notes due 2025, which improved over 2 points to 84. The 6¾% notes due 2018 were “very active too,” he said, rising over a point to 97 5/8.

Less active were the 5 7/8% notes due 2023 and the 5 3/8% notes due 2020, which ticked up ½ point to a point to 84 5/8 and 88¾, respectively.

At another desk, a trader said the 6 1/8% notes traded as high as 85, but ended closer to “84-ish.”

He said the 5 3/8% notes were “up about a point” at 88 ½.

“Those are a little bit shorter,” he said. “The longer-dated paper was up more.”

As for the equity (NYSE: VRX), it was up nearly 9% shortly before the bell.

The stock has fallen over 70% in the last year, as the company has dealt with probes into its drug pricing strategies and accounting practices.

The takeover bid reportedly came two weeks before the new CEO took over in April. The board of directors chose to reject the bid in order to give Papa time to get settled in his new position before considering a sale.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.