Concordia retreats with earnings; Alliance, Valeant anticipate theirs; oil surge pushes prices higher

By Colin Hanner

Chicago, Nov. 7 – A rising tide lifts all boats, or that was the main story with high yield energy bonds in distressed debt-land on Monday, as oil prices surged for the first time in seven sessions and strengthening equities trickled over.

That wasn’t the case though for Concordia International Corp., which stuck out as the biggest decliner on the day due to the drugmaker announcing its third quarter results, spurring double-digit losses in some of its notes.

Concordia’s term loan dropped to 82 bid, 83½ offered from 88 bid, 89 offered after the third quarter results were announced and financial guidance was suspended, according to a market source. The company said in a news release that guidance was suspended so that it could assess the business under new leadership.

For the quarter, Concordia reported a net loss of $75.1 million, or $1.47 per share, versus net income of $1.5 million, or $0.04 per share, in the third quarter of 2015.

Revenue for the quarter was $185.5 million, compared to $93 million in the prior year.

And, adjusted EBITDA for the quarter was $104.4 million, versus $71.4 million in previous year.

Shares of Concordia lost $1.47 for the quarter and after Monday’s news, shares were down $1.16, or 36.36%, to $2.03.

The 9½% notes due 2022 traded down to the “mid-40s,” down from mid-70s from a month prior on Oct. 7 and down about 12 points from Friday’s levels, a trader said.

“That was the biggest mover [of the day],” the trader said.

Another trader said the notes were out the door at 46¾ at close.

The 7% notes due 2023 were down 6¾ points to 44¼ from 50, another trader said.

Energy looking up

Behind the upward movement in high yield was the Federal Bureau of Investigation’s decision not to proceed with criminal charges against Democratic presidential nominee Hillary Clinton with regards to a series of emails that were found within the past two weeks.

The market capitalized on reaffirming news, as speculation in the market has favored her as the winner of Tuesday’s election.

Peabody Energy Corp. was “better with what stocks were doing,” a trader said, particularly its 6½% notes due 2020, which were up 1½ points to 48½.

A market source had the notes moving up to 48 for the day.

The 10% notes due 2022 traded up 2 points to 76, a trader said.

Peabody shares rose 45 cents, or 5.49%, to $8.65.

Some high yields jumped on the pricing surge of oil, including California Resources Corp., which saw a 2½ points uptick to 68½ in its 8% notes due 2022.

A market source said that it was one of the day’s biggest movers in high yield.

If the political news wasn’t enough to shock oil prices, Russia’s “on board” commitment with the Organization of Petroleum Exporting Countries’ plan to cut the supply glut in oil at the end of November did, as Secretary-General Mohammed Barkindo spoke on behalf of the country’s intentions on Monday.

West Texas Intermediate crude rose 88 cents, or 2%, to $44.95.

Brent crude increased 73 cents, or 1.60%, to $46.31.

Denbury Resources Corp., which announced its third quarter earnings last Thursday, saw a ½ point uptick in its 6 3/8% notes due 2021, which settled around 79½.

Denver-based Bonanza Creek Energy Inc.’s 5¾% notes due 2023 were up 6¼ points to 56¼, a market source said.

The oil and natural gas producer and explorer announced last week that it received a notice of a borrowing base deficiency under its credit agreement, a reduction to $150 million from $200 million, according to an 8-K filing with the Securities and Exchange Commission.

GenOn Energy’s 9½% notes due 2018 were trading around 72, unchanged on the day, according to a trader.

Coming down from being “absolutely slaughtered” last week was FirstEnergy Corp., an energy company that is in discussion to either seek bankruptcy or sell some of its facilities, according to various reports.

It saw declines in its 6.8% notes due 2039, which were down “a few more points” to the lower 50s, a trader said, as well as its 6.05% notes due 2021, which were down to “53 from higher 50s.”

Round up

“People are just waiting to see what will happen with the election,” a trader said, referring to moves in distressed debt-land that could result from Tuesday’s presidential election.

Awaiting Tuesday with a different idea in mind was Alliance One International, Inc., which was up ½ point to 84¾ in anticipation of its second-quarter earnings conference call, a market source said.

After close on Monday, Alliance One announced its quarterly earnings, with highlights including a gross profit decrease of 8.4% to $50.3 million and a sales decrease of 6.1% to $389.4 million due to weather, as well as the intent to repurchase $25 million to $50 million per year of its more expensive debt, a release said.

Also in quarterly earning mode is Valeant Pharmaceuticals International Inc., which will announce its third-quarter earnings on Tuesday.

A trader said that the 5½% notes due 2023 were trading in the high-70s, “a smidge lower” than previous levels.

Intelsat SA’s Jackson-linked 7¼% notes due 2019 were up ½ point to 78¼, a trader said.

Sara Rosenberg contributed to this article.

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