Valeant ‘firmer’ despite new lawsuit; oil sees new lows as supply increases; Community Health rebounds

By Colin Hanner

Chicago, Nov. 2 – Oil and its regularly traded distressed notes continued to slump for the third straight day, and more news surrounding Valeant Pharmaceuticals International Corp. surfaced in the distressed debt realm on Wednesday.

Seen as an effort to ease its debt, Valeant stole late-afternoon headlines on Tuesday when news came out that the company is in talks to sell Salix Pharmaceuticals Ltd., its stomach-drug business, to Takeda Pharmaceutical Co. for roughly $10 billion.

Valeant’s equities rose more than 30%, and one note in particular – its 6 1/8% notes due 2025 – traded up 5 points in the last half hour of trading, overshadowing the declines seen a day earlier when news came out that two of its former executives are under investigation for possible accounting fraud.

News surrounding Valeant didn’t stop Wednesday, but that didn’t cause as much volatility as seen in the past week.

The company was sued by Sprout Pharmaceuticals Inc. over claims surrounding Addyi, a female-libido drug that Valeant acquired for $1 billion in 2015, and whether Valent properly marketed the drug and made it reasonably priced for the market.

Though its equities reacted to the news, there was not much downward movement in its notes.

“The notes were firmer but not much higher after that late news yesterday,” a trader said.

“They opened up pretty wide, then settled in the low-80s,” another trader said. “They held a number of the gains made after the news of the potential sale.”

The 5 7/8% notes due 2023 traded up 1/8 point to 81 1/8, and its 5 3/8% notes due 2020 were up 1¼ point, a trader said.

Its 6 1/8% due 2025 were down 5/8 point to 81¾, a market source said.

Another trader said the 5 3/8% notes due 2023 and the 6 1/8% notes due 2025 were “the most actively traded notes” out of Valeant.

Oil keeps slipping

Oil companies saw another declining day in Distressed Land as oil prices continued to fall to five-week lows due to increases in U.S. crude stockpiles and continued predictions on supply cut talks around the Organization of Petroleum Exporting Countries.

Perhaps the biggest decliner of the day was EXCO Resources Inc., which announced its quarterly earnings on Tuesday.

“We improved our debt structure in the third quarter by reducing our unsecured notes by $101 million as we captured $61 million of discount,” vice president and chief financial officer Tyler Farquharson said on the company’s conference call announcing third-quarter earnings on Wednesday.

Its 7½% notes due 2018 were down 5 points to 52 2/5, a market source said, while its 8½% notes due 2022 were down 1½ points to 41 3/5.

U.S. crude stockpiles rose 14.4 million barrels, or 3.1%, week-over-week ending Oct. 28. From last year during the same period to Oct. 28, crude stockpiles have increased 7%.

An extra 400,000 barrels-per-day were pumped by Libya, Nigeria and Iran during October following a late September supply deal.

West Texas Intermediate crude fell $1.20, or 2.57%, to $45.47.

Brent crude fell $1.07, or 2.22%, to $47.07.

GenOn Energy’s 9½% notes due 2018 shifted downward 2¾ points to 78½, a market source said. NRG Energy, which bought GenOn in 2011, saw its equities drop nearly 7% on the day.

It will release its quarterly earnings on Friday.

The energy company also saw movement in its 9 7/8% notes due 2020, which traded down 1¼ points to 72½.

Oil and natural gas acquisition, production and development firm Vanguard Natural Resources, LLC has seen a nearly 10-point swing downward in its 7 7/8% notes due 2020 in the past week. On Oct. 26, the notes were trading at 57 on Oct. 26 and traded down 2½ points to 48½ on Wednesday.

Vanguard’s stock price was down 5 cents, or 7.85%, to 61 cents.

CGG SA, the French-based geophysical services company focused primarily on oil and natural gas, saw some movement in its 6½% notes due 2021, which were “very active,” a trader said, beginning trading around “49-50” before declining 2½ points to 47½.

Another market source said the same notes were down 3 points to 47½.

“I’m not sure as to why [there was movement],” the trader said. “Maybe they’re coming back from a rally the other day.”

A trader said the 6 7/8% notes due 2022 were “not as active” but down 1¾ points to 48½.

California Resources Inc. continued to “trade down with oil” and saw a decrease in its 8% notes due 2022, which were down 2 points to 65¼, a trader said, while a separate market source had the notes down 2¾ points to 65¾.

Denbury Resources Inc.’s 6 3/8% notes due 2021 were down 1 point to 80¼, according to a market source.

Health and hospitals

Community Health Systems Inc. “rebounded off the load from yesterday,” one trader said, and saw upticks in two notes.

The 8% notes due 2019 were up “almost 2 points” to 85 5/8, a trader said, and the 7 1/8% notes due 2020 were up 5/8 point to “around 80.”

Still straggling were Quorum Health Corp.’s 11 5/8% notes, which were down 2¾ points to 69¾.

“[Quorum] can’t seem to get out of it,” a trader said.

Concordia International Corp.’s 9½% notes due 2022 were down ¼ point to 60½, a trader said.

The healthcare company announced the new leadership of its chief executive officer, Allan Overman, and chairman of the board, Jordan Kupinsky, whose positions will go into effect Nov. 14.

Other news coming out of Concordia was that it will enter an additional cross-currency swap agreement, which it believes will “further align its British pound-sterling earnings with its debt obligations,” according to a release.

The swap is worth an estimated $350 million, which converts to £287 million, and matures in April 2022.

Round up

Alliance One International, Inc.’s 9 7/8% notes due 2021 finished trading at 84¾ on Tuesday after several intraday swings, going as low as 83½ and as high as 85½.

The notes finished at 84, down ¾ point, according to a market source.

The company announced late on Tuesday that Michael Shannon, previously at Deutsche Bank Securities working with its leveraged loan and bond markets, will serve as vice president and treasurer.

Intelsat Corp.’s Jackson-linked notes “continue to leak,” one trader said, particularly its 7¼% notes due 2019, which were down 1¾ points to 77½. Another trader had the same note down to 77.

Its 7¼% notes due 2020 were trading “around 71½,” down 2½ points from Tuesday’s close.

Modular space and secure storage company, Algeco Scotsman, Inc., was “active” in its 10¾% notes due 2019, down ½ point to 64, a trader said.

iHeartMedia Inc.’s 10% notes due 2018 were down 1 point to 69 on “a handful of trades,” one trader said. Another trader saw identical movement.

Devika Patel contributed to this article.

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