Valeant takes nosedive after earnings announced; Concordia continues plunge; Alliance, Endo see movement

By Colin Hanner

Chicago, Nov. 8 – Election Day in the United States had equity markets in an upswing as signs of a Hillary Clinton presidential win seemed apparent, yet distressed debt-land responded largely to follow-ups of recent trending names and the final round of earning announcements.

“I wouldn’t say this election is having any macro-effect on distressed,” a trader said. “It’s more focused on company-specific catalysts.”

Valeant Pharmaceuticals International Inc. saw some downward volatility during Tuesday’s session.

The Canadian pharmaceuticals company has made headlines recently for a federal probe into former executives for possible accounting fraud; the sale of Paragon Holdings on Tuesday to settle Federal Trade Commission charges, according to a report by Forbes; and the potential sale of Salix Pharmaceuticals Co. to Takeda Pharmaceuticals Co. for around $10 billion.

Valeant posted a $1.22 billion loss for the quarter, and cut its adjusted earnings to $5.30 to $5.50 a share on $9.55 billion to $9.65 billion in sales, from estimates of $6.60 to $7 a share and revenue between $9.9 billion and $10.1 billion.

Moody’s Investors Service said it downgraded the ratings of Valeant and subsidiaries, including the corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD.

The downgrade reflects Valeant’s challenges in turning around its specialty pharmaceuticals business, resulting in weak earnings trends and financial leverage remaining above the agency’s earlier expectations.

With higher financial leverage, Valeant will become more vulnerable to any significant operating setbacks or legal liabilities arising from government investigations, the agency added.

In distressed-debt land, Valeant’s relevant notes were trading down significantly in response to the news.

“All the bonds were trading multiple times,” a trader said, especially the 7½% notes due 2021, which were down 3½ points to 88½.

A market source said the 5 7/8% notes due 2023 were down 3 points to 75¾, and the 6 1/8% notes due 2025 were down 2¼ points to 75¾. Another trader had the latter notes down 3 points to the same levels.

Rounding out Valeant were the 6 3/8% notes due 2020, which were down 3¾ points to 86.

Concordia follow-up

On Monday, Concordia International Corp. announced dismal third-quarter results, which resulted in steep declines for some of its notes.

The same trend occurred on Tuesday, though the drops were much softer.

Concordia’s 7% notes due 2023 traded down 3 points on “a dozen trades” to a 37½ to 38 handle, several traders said. Those same notes were down 6 points during Monday’s trading.

The 9½% notes due 2022 saw movement on “30 trades,” a trader said, and were down 6¼ points to 40¾ to 41 area. Through this week, the notes are down nearly 20 points.

Alliance down

With an announcement of its second-quarter results late Monday, Alliance One International, Inc. saw a reflection of its results in its 9 7/8% notes due 2021, which were down “2 points or so” to 82½, a trader 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-$50 million per year of its more expensive debt, a release said.

Endo earnings

Pharmaceutical company Endo International Plc saw an 18.6% rise in quarterly revenue, to $884.3 million from $745.7 million, the company announced Tuesday.

The company’s 6% notes due 2023 were up ¼ point to 82¼ on a “bunch of trades,” a trader said.

In energy

Chaparral Energy, Inc. asked the U.S. Bankruptcy Court for the District of Delaware to extend the company’s exclusive periods for filing and soliciting votes on a Chapter 11 plan, according to a motion filed Monday.

“While significant progress has been made, negotiations are ongoing and, accordingly, the debtors have filed this motion out of an abundance of caution,” Chaparral said in the motion.

Their 8¼% notes due 2021 were unchanged at 76, according to a market source.

Natural Resource Partners LP announced on Tuesday that it expects to pay its debt and continue its compliance with debt covenants, but warned that its forecast was subject to shifting commodity variables and counterparty risk.

A market source said the company’s 9 1/8% notes due 2018 were up ½ to 92½.

Gold, silver and copper producer Freeport-McMoRan Inc. saw a ¾ point uptick in its 5.45% notes due 4043, which settled at 82¾, according to a trader.

Peabody Energy Corp. “continued to rally,” according to a trader, who saw the company’s 6½% notes due 2020 climb again on Tuesday, 2¼ points to 50½.

“Peabody has been topical and trendy,” the trader said. “It’s seen an uptick from rising coal prices.”

The 10% notes due 2022 traded “around 78,” a nearly 3-point increase compared to Monday’s levels.

California Resources Corp.’s 8% notes due 2020 were down 7/8 point to 68, a trader said.

Rounding out energy bonds were MEG Energy Corp.’s 7% notes due 2024, which were up 1½ points to 84, and Denbury Resources Inc.’s 6 3/8% notes due 2021, which were up 1 point to 80½.

Round up

Coming off the announcement for the exchange offer for two series of its redeemable perpetual preferred stock is Navios Maritime Holdings Inc., which saw upward movement in its 7 3/8% notes due 2022, which traded up ¾ point to 52¼.

A trader said Quorum Health Corp.’s 11 5/8% notes due 2023 were down ¾ point to 68½ on the eve of its third quarter earnings.

Intelsat SA’s Jackson-linked 7¼% notes due 2019 were up ¾ point to 79, a market source said.

Caroline Salls contributed to this article.

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