Valeant bonds up on asset sale; most oil issues firmer as crude remains under pressure; Intelsat gains altitude

By Paul Deckelman

New York, June 8 – Canadian drug manufacturer Valeant Pharmaceuticals International Inc.’s bonds moved up on Thursday on news that the underperforming Valeant will sell one of its divisions for close to $1 billion.

The proceeds from the asset sale are expected to be used to pay down some of Valeant’s massive debt burden, estimated north of $28 billion.

Elsewhere, Intelsat SA’s bonds were seen mostly better, with investors having apparently taken in stride the demise of the Luxembourg-based communications satellite company’s planned merger with sector peer OneWeb, which would have brought with it a $1.7 billion investment in Intelsat by OneWeb’s corporate sponsor, Japanese tech giant SoftBank Group.

On the downside, Rite Aid Corp.’s bonds fell amid media speculation that the drugstore chain operator’s planned acquisition by larger rival Walgreen Boots Alliance may not come to fruition due to potential antitrust issues.

Oil and natural gas issues such as California Resources Corp., Chesapeake Energy Corp. and EP Energy Corp. were lower across the board as world crude oil prices remained under pressure for a second straight session, following a surprise report Wednesday of an upturn in U.S. crude stockpiles in the latest reporting period.

Valeant up on asset sale

Valeant Pharmaceuticals International’s paper popped, a trader said, after the embattled Canadian drug manufacturer “sold some assets.”

He saw its 6 7/8% notes due 2025 up ¼ point, at 80 5/8 bid.

More than $18 million of those notes were traded.

Its 5 3/8% notes due 2020 gained 5/8 point, at 93 5/8 bid, with over $16 million of volume.

And its 6 3/8% notes due 2020 gained 11/16 point, ending at 94 11/16 bid, with over $15 million traded.

The bonds rose on the news that Laval, Que.-based Valeant will sell its iNova Pharmaceuticals business for $930 million to a company co-owned by Pacific Equity Partners and the Carlyle Group.

Proceeds will go to help pay down some of its $28 billion debt burden.

Rite Aid in retreat

An M&A offering which may be in trouble was seen as the catalyst for Thursday’s plunge in Rite Aid Corp.’s paper such as its 6¾% notes due 2021.

A trader saw the bonds down more than a deuce on the day at 99 bid, on volume of over $13 million traded.

A market source noted “several days of negative news coverage” on the prospects for Rite Aid’s pending $15 billion acquisition by larger sector peer Walgreen Boots Alliance.

The deal is now before federal anti-trust regulators amid speculation they could kill the transaction on anti-trust grounds. Rite Aid and Walgreen first announced their proposed combination more than a year-and-a half ago, in October of 2015.

Intelsat issues improve

Intelsat SA now appears destined to go it alone without its planned merger with sector peer OneWeb LLC and a $1.7 billion investment in the combined company by OneWeb’s corporate sponsor, Japanese telecom and high-tech giant SoftBank Group.

But the prospect does not seem to unnerve the Luxembourg-based communications satellite company’s bondholders.

After some initial dismay in the wake of the company’s decision to end a big debt exchange transaction due to insufficient investor participation (the merger and the SoftBank investment were officially conditioned up successful completion of the debt exchange transaction), the company’s existing bonds were seen having firmed smartly in Thursday dealings.

Its 5½% notes due 2023 were 1 point better at 83 bid, with over $18 million traded.

Its 8 1/8% notes due 2023 climbed by 1 1/8 points, to51 3/8 bid.

And its 7¼% notes due 2020 rose by a little more than 1 point, to 93½ bid.

Oil names continue slide

A second straight session of lower oil prices sent bonds of that sector lower, also for a second day in a row.

A market source said that California Resources Corp.’s 8% notes due 2022 remained in the upper 60s, to which the bonds had plunged on Wednesday, when they lost 5 points in the day. More than $21 million traded.

Chesapeake Energy’s 8% notes due 2027 slid by 1¼ points, to 95½ bid, with over $18 million changing hands.

EP Energy’s 8% notes due 2025 were down by 2 points at 79 ½ bid, while its 9 3/8% notes due 2020 were 1 point lower, at 87¼ bid, on volumes of $20 million and $14 million, respectively.

The energy company’s bonds lost ground as crude prices continued to add to the losses they suffered on Wednesday, when y plunged by some 5%, or more than $2 per barrel, on unexpectedly strong U.S. crude petroleum inventory figures.

In Thursday’s dealings, West Texas Intermediate for July delivery slipped by 8 cents per barrel on the New York Mercantile Exchange, ending at $45.64.

Brent crude for August delivery ended 20 cents lower, at $47.86 per barrel.

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