Healthcare sector mixed after equities rally; Valeant up, Concordia down; Intelsat rises post-exchange deal

By Colin Hanner

Chicago, Dec. 7 – Equity markets surged on Wednesday, and with them came several distressed bond market movers, including the healthcare sector.

“We almost closed 300 points up on the Dow,” a trader said. “The same kind of thing was happening in the bond market, a lot of bonds were up. It certainly was the case in the healthcare sector.”

Another trader had a differing view of the market.

“There was not a lot of price action [in distressed bonds],” the trader said. “Based on the way the market rallied so much, it seemed like they would creep up and nothing would be around on the offer side.”

The trader said new issues, like Chesapeake Energy Corp., were filling echo chambers in the high-yield bond market.

Healthcare equites were resoundingly down during the session, fueled by a Time magazine article that quoted Donald Trump saying he wants to lower drug prices.

Yet, of those healthcare names that saw upward movement in its bonds was Valent Pharmaceuticals International Inc., which posted gains in several of its notes.

On the other hand, Concordia International Corp. was down, several points in one case. A trader said a recent article from a financial publication may be stirring some movement in the notes.

Luxembourg-based Intelsat SA continued to trade up after a recent exchange deal was reached on Monday.

Oil slipped for the second-straight session, fueled by continued speculation surrounding the logistics of the most recent Organization of Petroleum Exporting Countries deal, but California Resources Corp. inched higher, dismissing oil futures movement.

In healthcare

Much of the upward movement in equity markets on Wednesday seemed, for the most part, to circumnavigate the healthcare sector, prompted by the president-elect saying he would “bring down drug prices” because he doesn’t “like what’s happened with drug prices.”

Price gouging for pharmaceutical companies has stirred outrage at the consumer and government levels in recent months, including Valeant Pharmaceuticals, though its distressed bonds saw modest gains during Wednesday’s session.

A trader said that the company’s 6 1/8% notes due 2025 were up ½ point to 75½, and the 6 3/8% notes due 2020 were up 5/8 point to 85 1/8.

Rounding out Valent were 1-point gainers in its 7% notes due 2020, which settled at 77; the 5 3/8% notes due 2020, which finished at 84¾; and the 7½% notes due 2021, which were up to 85¼, according to a market source.

Valeant’s stock was down 55 cents, or 3.52%, to $15.08.

Moving down in pharmaceuticals was Concordia International, which posted losses in its distressed bonds on Wednesday.

A trader said the 7% notes due 2023 were trading with a 35½ handle, down a “couple points” from the last time it traded.

The 9½% notes were down to 40¼ to 40½ from 44, a 3½ to 3¾ point swing, according to several traders.

A market source said the downward movement for Concordia came as a report from a financial news outlet, which said that the Canadian pharmaceutical company was hiring attorneys for the purposes of a restructuring.

“It looks like [Concordia] might have a restructuring looming on the horizon,” the trader said, though he did not specify the origin of the report.

Hospital operator Community Health Systems Inc.’s 6 7/8% notes due 2022 were down 3/8 point to 70 1/8, a trader said.

The company’s 8% notes “were ticking up a little bit,” a trader said, to 86¾, a ½ point to ¾-point increase from Tuesday’s levels.

Intelsat continues rally

“On the heels of the exchange deal, [Intelsat] continues to trade up,” a trader said, referring to the satellite company’s most recent exchange deal announced on Monday.

Under the terms of the deal, Intelsat agreed to exchange new 12½% senior notes due 2022 plus cash for some of its 6¾% senior notes due 2018 in a private transaction and to exchange new 12½% senior notes due 2022 plus cash for some of its 6¾% senior notes due 2018, 7¾% senior notes due 2021 and 8 1/8% senior notes due 2023 in a separate agreement.

A market source said the Jackson-linked 7¼% notes due 2019 were up ¼ point to 82¾, and the 7¼% notes due 2020 were up 1 point to 76 5/8.

The Luxembourg-linked 7¾% notes due 2021 were trading “around the 35¼ to 35½ area” and the similarly linked 6¾% notes due 2018 moved up 2½ points to 82½.

Oil down, bonds mixed

Oil futures were down for the second consecutive day on Wednesday, amid speculation prior to non-OPEC members meeting on Saturday to discuss supply cuts, as well as forecasts put out by the Energy Information Administration that showed an increase in U.S. shale production in the next two years.

Yet, California Resources went against the sentiment surrounding oil during the session and ticked up ½ point to 89 in its 8% notes due 2022.

Denbury Resources Corp. saw modest losses in its 6 3/8% notes due 2021, which were down 7/8 point to 90, a market source said.

Though Linn Energy, LLC did see high-volume trading in its 6½% notes due 2019, and intraday lows around a 36 handle, they finished the day at 38½, unchanged from Tuesday’s levels.

Its 7¾% notes due 2021 were up 1½ points to 39¼, a market source said.

Mixed market round up

Murray Energy Corp.’s 11¼% notes due 2021 were up 1 point to 77¼, a trader said.

Fashion retailer rue21, Inc.’s 9% notes due 2021 were a “smidge lower,” down 1 point to 22.

A market source said pulp and paper manufacturer Resolute Forest Products Inc. was one of the biggest movers in high yield, as its 5 7/8% notes due 2023 were up 2¼ point to 82.

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