Mallinckrodt lower on ratings downgrade; DISH mixed after acquiring assets

By James McCandless

San Antonio, May 22 – The distressed space turned its focus to pharmaceutical and telecom names in Wednesday’s activity.

Mallinckrodt plc’s notes traded lower after receiving a downgrade following the company’s announcement that it is suing the United States government.

Sector peer Teva Pharmaceutical Industries Ltd.’s issues finished mixed.

Elsewhere, pay-TV provider DISH Network Corp.’s paper were mixed after acquiring a string of assets.

Retailer J.C. Penney Co., Inc.’s notes were in decline a day after releasing its first-quarter earnings report.

PetSmart, Inc.’s issues were gaining during the session.

In energy, as oil futures tanked, California Resources Corp.’s paper improved while Weatherford International plc’s notes saw mixed activity.

In telecom, Frontier Communications Corp.’s issues also ended mixed while Intelsat SA’s paper improved.

Mallinckrodt lower, Teva mixed

Remaining at the top of distressed trading, Mallinckrodt’s notes moved lower, traders said.

The 5 5/8% notes due 2023 fell 1 point to close at 70 bid. The 5½% notes due 2025 lost 1¼ points to close at 66 bid.

During the Wednesday session, Moody’s Investors Service issued downgrades to the Staines-upon-Thames, U.K.-based drug manufacturer.

The agency lowered the company’s corporate family rating, probability of default rating and several issue-level ratings.

The downgrades come in reaction to Tuesday’s news that the company is suing the United States Department of Health and Human Services and the Centers for Medicare and Medicaid Services to stop a change in how the government calculates rebates for its Acthar Gel drug.

The change would reduce future rebates by 10% and could see the name pay back up to $600 million in retroactive rebates.

“I think as long as these companies continue to have legal issues, the sector will suffer,” a trader said.

Petach Tikva, Israel-based sector peer Teva’s issues finished mixed.

The 3.15% notes due 2026 added ½ point to close at 81 bid. The 4.1% notes due 2046 shaved off ¼ point to close at 69¼ bid.

DISH mixed

Elsewhere, DISH’s paper also finished mixed, market sources said.

The 2 3/8% paper due 2024 declined by ½ point to close at 87 bid. The 5 7/8% paper due 2024 rose ¾ point to close at 88½ bid.

Starting Monday, the Englewood, Colo.-based pay-TV provider’s structure has been under pressure after announcing that it had purchased EchoStar’s broadcast satellite service for more than $800 million.

The company’s spectrum assets, which it is seeking to monetize, have fallen out of favor after Sprint and T-Mobile’s merger was approved Monday.

“The idea is that now there’s less demand for access to their spectrum if T-Mobile uses Sprint’s infrastructure,” a trader said.

J.C. Penney off, PetSmart up

In retail, J.C. Penney’s notes were in decline, traders said.

The 5 7/8% notes due 2023 fell ¾ point to close at 83½ bid. The 8 5/8% notes due 2025 slipped 1 point to close at 54 bid.

The Plano, Texas-based department store chain issued its first-quarter earnings report on Tuesday.

The company showed a loss of 46 cents per share, worse than the 39 cents per share loss that analysts had expected.

It also reported revenues of $2.56 billion.

Phoenix-based sector peer PetSmart’s issues were moving upward.

The 8 7/8% notes due 2025 tacked on ½ point to close at 88 bid. The 5 7/8% notes due 2025 gained 1 point to close at 92 bid.

Oil futures dip

As oil futures took a dive, distressed energy tranches saw mixed results, market sources said.

Los Angeles-based independent oil and gas producer California Resources’ paper was rising.

The 6% notes due 2024 added ½ point to close at 65¼ bid. The 8% notes due 2022 gained ¼ point to close at 79½ bid.

Baar, Switzerland-based oilfield services provider Weatherford’s issues were mixed.

The 8¼% notes due 2023 rose ½ point to close at 58½ bid. The 9 7/8% notes due 2024 dropped ½ point to close at 58 bid.

As U.S. stockpiles rise and demand worries grow, West Texas Intermediate crude oil futures for July delivery fell $1.71 to end the session at $61.42 per barrel.

North Sea Brent crude oil futures for July delivery closed the session at $70.99 per barrel after losing $1.19.

Frontier mixed, Intelsat gains

In the telecom space, Norwalk, Conn.-based wireline communications name Frontier’s issues finished mixed, traders said.

The 10½% notes due 2022 picked up 1½ points to close at 69½ bid. The 11% notes due 2025 shaved off ¼ point to close at 64 bid.

Luxembourg-based sector peer Intelsat’s paper was on the rise.

Intelsat Jackson Holdings SA’s 5½% paper due 2023 added ¼ point to close at 90½ bid. Intelsat (Luxembourg) SA’s 8 1/8% paper due 2023 rose ½ point to close at 75½ bid.

“The sector kind of fell off in recent weeks but it always comes back into the forefront,” a trader said.

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