New Valeant bonds jump, existing issues continue retreat; Intelsat gains; energy still weak

By Paul Deckelman

New York, March 10 – Valeant Pharmaceuticals International Inc. remained the big name in the distressed debt market on Friday, traders said.

They saw both halves of the troubled Canadian drug manufacturer’s huge new deal trading very actively and well up from the levels at which that megadeal had priced on Thursday.

However, the company’s existing bonds were heading the other way, continuing the fall they had seen ever since the big new issue was announced several days ago.

Those bonds were also being buffeted by investor concerns over possible changes in the healthcare laws in the United States.

Elsewhere, communications satellite company Intelsat SA’s paper gained altitude across its capital structure.

Energy issues remained under some pressure as crude oil prices struggled this week. Sector bellwether California Resources Corp.’s benchmark issue again eased, although its losses were considerably smaller than earlier in the week.

New Valeant firms smartly

Traders saw considerable activity on Friday in both halves of Valeant Pharmaceuticals International’s new issue.

Each was trading well above 101½ bid, with over $158 million of the 7% notes due 2024 and over $80 million of the 6 ½% notes due 2022 changing hands.

Laval, Que.-based Valeant had priced $1.25 billion of the 6½% notes and $2 billion of the 7% paper on Thursday. Both halves of that regularly scheduled forward calendar deal pricing at par.

The two-part megadeal – upsized to $3.25 billion from an originally announced $2.5 billion – thus became the largest junk bond offering to come to market so far this year,

Valeant plans to use the proceeds to repay existing debt.

Existing Valeants lose more

However, the prospect of that big new deal has roiled Valeant’s existing paper for most of the week.

Those issues fell sharply on Monday and Tuesday on the news the deal was coming, recovered a little around mid-week, but were seen once again lower on Friday.

The company’s most actively traded issue, the 6 1/8% notes due 2025, was marginally lower on Friday, ending at 77½ bid on volume of around $19 million. A week ago they had been trading above the 80 bid level, a market source said.

Valeant’s existing 5 3/8% notes due 2020 retreated by 7/8 point on Friday to close at 90 5/8 bid, also on around $19 million of volume, while its 6 3/8% notes due 2020 plummeted by 1 3/8 points to close at 91½ bid on more than $15 million of turnover.

Besides the new-deal news, traders noted that Valeant’s bonds were also hit by investor angst about the healthcare sector in general, prompted by Washington developments, as Congressional Republicans introduced their bill to repeal the existing Obamacare law in the United States – and as President Donald Trump’s tweets indicated that he was looking for a substantial rollback in drug prices as part of his planned healthcare overhaul.

Intelsat moves back up

Elsewhere, Intelsat’s paper continued its week-long gyrations on Friday.

The Luxembourg-based communications satellite company’s paper had risen earlier in the week, only to fall badly on Thursday.

But on Friday, the issues were seen headed back up again.

Its Intelsat (Luxembourg) Holdings SA 8 1/8% notes due 2023 rose nearly 1 full point to end at just under 62 bid, with over $29 million of the notes traded, a trader said.

He saw the Intelsat Jackson Holdings SA 7¼% notes due 2020 up 5/8 point at 93½ bid as over $21 million of the bonds changed hands.

Its 7¼% notes due 2019 closed up ¼ point at 97 bid.

Energy under pressure

Energy issues were generally weaker on Friday as crude oil prices continued to struggle on supply concerns.

The benchmark U.S. crude grade, West Texas Intermediate for April delivery – which slipped below the psychologically significant $50 per barrel mark this week – moved further southward on Friday, losing another 79 cents per barrel in trading on the New York Mercantile Exchange to settle at $48.49.

That, in turn pushed energy paper such as California Resources’ benchmark 8% notes due 2022 lower. It eased by ¼ point to 81¾ bid, with over $35 million traded.

However, the traders noted that the losses moderated. On Thursday, the Los Angeles-based oil and natural gas exploration and production company’s paper had swooned by between 1½ and 2 points on the day, also in very active trading.

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