Mallinckrodt’s woes continue; Teva drops; J.C. Penney explores options

By Abigail W. Adams

Portland, Me., July 19 – The distressed debt space saw light volume on Friday with few names seeing substantial activity, a market source said.

The issues that did see some activity were largely losing ground.

Mallinckrodt plc’s junk bonds continued to trade off on Friday as negative news for the pharmaceutical company mounts.

Teva Pharmaceutical Industries Ltd.’s junk bonds were also losing ground as some of the bonds in its corporate structure approach maturity.

While volume was light, J.C. Penney Co. Inc.’s 5.65% senior notes due 2020 sank on news the struggling retailer was exploring options to restructure its debt.

Mallinckrodt down again

Mallinckrodt’s junk bonds continued their downward momentum on Friday as negative news surrounding the company mounts.

Mallinckrodt’s 4 7/8% senior notes due 2020 were off 1 point on Friday.

They traded down to 93½ after previously trading around 94½, according to a market source.

While volume was light, the pharmaceutical company’s 5 5/8% senior notes due 2023 dropped 3½ points to 66½, according to a market source.

They were trading at 73 at the start of the week.

Mallinckrodt’s 5½% senior notes due 2025 were off another 1 point to trade down to 59½.

They were trading on a 64 handle at the launch of the week.

The notes have steadily traded down since Wednesday when the company announced it was abandoning its clinical trial for the use of Acthar Gel in treating amyotrophic lateral sclerosis (ALS).

Rumors were circulating on Friday that law firm Jones Day was organizing talks with secured lenders regarding the company’s lawsuit against the U.S. Department of Health and Human Services and Centers for Medicare and Medicaid Services and a potential material adverse conditions event, according to a market source.

The lawsuit, which is ongoing, challenged the government agencies’ decision to require Mallinckrodt to change the manufacturer price used to calculate Medicaid rebates for Acthar Gel.

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

Teva trades down

Generic drug maker Teva also saw its junk bonds trade off on Friday with some of its debt load approaching maturity.

Teva’s 6¾% senior notes due 2028 dropped 1¾ points to 86¼ during Friday’s session, according to a market source.

More than $18 million of the bonds were in play during the session.

Teva’s 3.15% senior notes due 2026 were off about 1 point.

They were changing hands around 74 with $15 million in reported volume on Friday, according to a market source.

J.C. Penney down

While volume was light and the majority of activity was odd lot trades, J.C. Penney’s 5.65% senior notes due 2020 were down 5 points on Friday.

The notes traded down to 90, although there were no round lot trades, a market source said.

For larger volume trades, there were offers but no bids, the source said.

News broke on Friday that J.C. Penney had hired advisers to explore debt restructuring options.

The options being explored include raising additional cash or pushing out debt maturities and are focused on avoiding a bankruptcy filing, Reuters reported.

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