Exela jumps on buyout speculation; Mallinckrodt decline continues; energy names under pressure

By Abigail W. Adams

Portland, Me., July 18 – Several names in the distressed debt space saw active trading on Thursday, albeit the notes moved in opposite directions.

Exela Technologies Inc.’s 10% senior notes due 2023 were on the rise on Thursday on news an investor group had expressed interest in buying out the company.

The oil patch remained under pressure on Thursday with several energy names selling off as crude oil futures hit their lowest level in a month.

Mallinckrodt plc’s 5½% senior notes due 2025 continued their decline on Thursday despite news of a new partnership.

Exela on the rise

Exela’s 10% senior notes due 2023 were posting gains on Thursday on news a group of investors had proposed buying out the company.

The 10% notes rose 3 points to close the day at 84¾, a market source said.

The notes saw more than $30 million in reported volume during Thursday’s session.

The notes were in focus after news broke that a group of investors had proposed buying all outstanding shares of the company, according to a market source.

The 10% notes have been on the radar of distressed debt players since a lackluster first-quarter earnings report and a rating downgrade in May.

Mallinckrodt decline continues

News of a new partnership did little to stymie the downward trend of Mallinckrodt’s 5½% senior notes due 2025.

While volume was light on Thursday, the 5½% notes dropped another 1½ points to 60½, according to a market source.

The notes dropped 2 points on Wednesday on news the pharmaceutical company was halting its clinical trial for the use of Acthar Gel in treating amyotrophic lateral sclerosis (ALS).

Acthar Gel is one of Mallinckrodt’s largest sources of revenue.

However, the product has been a constant source of controversy and sparked the sell-off of Mallinckrodt’s junk bonds several times in recent months.

Mallinckrodt’s capital structure cratered in late May after the pharmaceutical company announced it was filing suit against the U.S. Department of Health and Human Services and Centers for Medicare and Medicaid Services.

The suit challenged the government agencies’ decision to require Mallinckrodt to change the manufacturer price used to calculate Medicaid rebates for Acthar Gel.

Mallinckrodt is also facing a whistleblower lawsuit, which alleges Questcor Pharmaceuticals Inc., which Mallinckrodt acquired in 2014, bribed doctors to increase sales of Acthar.

News of a new partnership on Thursday did little to reverse the downward trend of the company’s junk bonds.

Mallinckrodt announced on Thursday it was partnering with Silence Therapeutics to develop RNAi therapeutics.

Oil names under pressure

Oil names were again under pressure on Thursday as crude oil futures slid another 2% to hit a one month low.

California Resources Corp.’s bellwether 8% senior notes due 2022 dropped 3½ points to close the day at 67, according to a market source.

The notes saw more than $15 million in reported volume during Thursday’s session.

Whiting Petroleum Corp.’s 6 5/8% senior notes due 2026 dropped 3½ points to 90½ with more than $32 million of the bonds on the tape.

Chesapeake Energy Corp.’s 8% senior notes due 2025were down another 2 5/8 points to 84½.

The 7% senior notes due 2024 were also down 2 5/8 points to 82 3/8.

The barrel price of WTI crude oil for August delivery settled at $55.30, a decrease of $1.48 or 2.61%, on Thursday.

The sell-off in crude oil futures was sparked as oil production in the Gulf of Mexico resumed at a quicker than anticipated pace following Hurricane Barry.

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