Halcon Resources tanks amid rumors of bankruptcy filing; Weatherford, Mallinckrodt drop

By Abigail W. Adams

Portland, Me., May 10 – The tape was again soft on Friday with earnings related news driving several distressed names lower.

Halcon Resources Corp. was in focus with the notes dropping almost 20 points amid speculation the company was again heading for a Chapter 11 bankruptcy filing.

After a rebound during the previous session, Weatherford International plc’s junk bonds were again trading down during Friday’s session.

The company announced its intention to file for bankruptcy after the market close.

Mallinckrodt plc’s 5½% senior notes due 2025 saw a large decline on Friday with holders of the notes looking to leave the name.

While the tape was largely soft with most names losing ground, Dean Foods Co.’s 6½% notes due 2023 continued to gain in active trading.

Halcon Resources tanks

Halcon Resources 6¾% senior notes due 2025 were in focus in the distressed debt space with the notes dropping almost 20 points in high-volume activity.

The 6¾% notes fell to 44½ by the late afternoon after previously trading around 63¼, a market source said.

About $40 million of the bonds were on the tape by the late afternoon making it among the most actively traded issues in the aftermarket.

The notes were dropping after Halcon Resources reported mixed first-quarter earnings.

Halcon reported non-GAAP losses per share of 1 cent versus analyst expectations for losses per share of 10 cents.

However, revenue of $51.9 million missed analyst expectations for revenue of $59.5 million.

The 6¾% notes tanked amid speculation the company was again heading for a Chapter 11 bankruptcy filing, a market source said.

Halcon initially filed for bankruptcy in 2016. However, the company was able to restructure and exit bankruptcy after just 1.5 months.

Weatherford down again

After a rebound during Thursday’s session, Weatherford’s junk bonds were again down after another delay in its earnings report.

The 5 1/8% senior notes due 2020 were down more than 4 points to 69¾, according to a market source.

They gained 2 3/8 points to change hands just shy of 74 during Thursday’s session.

Weatherford’s 8¼% senior notes due 2023 dropped 1¾ points to 63¼, according to a market source.

Weatherford’s junk bonds were under pressure after the company delayed its earnings report, which was initially expected on Wednesday.

The company was expected to release earnings prior to the market open on Friday. However, the earnings report did not materialize until after the market close.

The company announced in its quarterly report its intention to file for Chapter 11 bankruptcy.

Mallinckrodt drops

Mallinckrodt’s 5½% senior notes due 2025 dropped 3 3/8 points on Friday, a market source said.

The notes were changing hands at 75½ late Friday afternoon.

They were previously trading around 78¾, a market source said.

Mallinckrodt’s junk bonds have been mixed since it released its earnings report earlier in the week, despite a top- and bottom-line earnings beat.

There has been no recent news to explain the trading activity on Friday, a market source said.

However, Mallinckrodt has been the subject of a whistleblower lawsuit about the marketing practices of Questcor Pharmaceuticals Inc., which Mallinckrodt acquired in 2014.

News broke last week that the U.S. Department of Justice intervened in the lawsuit in March and may bring its own complaint against the pharmaceutical giant.

The deadline for the Department of Justice to file the complaint is approaching.

Dean Foods gains

While the overall space was soft on Friday, Dean Foods 6½% senior notes due 2023 remained a bright spot with the notes again on the rise.

The 6½% notes jumped another 3 points to 64¾ on Friday, sources said. The notes remained active with more than $14 million of the bonds on the tape.

The notes have seen positive momentum since their earnings report on Tuesday.

Despite a large earnings miss, investors were responding favorably to management’s decision to sell portions of the company.

A short squeeze may be continuing to drive the notes higher, a source said.

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