Pharma names lower on more settlement news; Rackspace improves after conference call

By James McCandless

San Antonio, Aug. 28 – More turmoil in the pharmaceutical sector and a rally in energy drove the distressed space on Wednesday.

Teva Pharmaceutical Industries Ltd.’s notes trended lower amid news that a competitor is in talks to settle all opioid-related lawsuits against it for billions.

Sector peers Endo International plc’s and Mallinckrodt plc’s notes were also declining.

Meanwhile, software name Rackspace Inc.’s paper moved up after the company held a conference call on its latest earnings report.

In energy, Tallgrass Energy LP’s notes dropped after a majority shareholder offered the company a buyout deal that would take it private.

As oil futures gained, Oasis Petroleum Inc.’s, Valaris plc’s and Diamond Offshore Drilling, Inc.’s issues rose in kind.

Elsewhere, in telecom, Frontier Communications Corp.’s paper declined.

Pharma weakens

Distressed pharma tranches, like Teva’s, continued to show weakness, traders said.

The 2.8% senior notes due 2023 lost ½ point to close at 83½ bid. The 6¾% senior notes due 2028 shaved off ¼ point to close at 83 bid.

The Petach Tikva, Israel-based generic drug producer’s notes were among the most active in the space amid more developments in the opioid lawsuit landscape.

Late Tuesday, news broke that competitor Purdue Pharmaceuticals is considering a deal to settle more than 2,000 lawsuits against it for $12 billion.

Purdue’s alleged involvement in the opioid epidemic has been one of the most high-profile.

The news comes on the heels of a settlement order in Oklahoma, where a district judge ordered Johnson & Johnson to pay $572 million to the state earlier in the week.

Analysts have said that the industry could pay billions more.

“I don’t know how much, say, Teva will have to pay, but the numbers are pretty grim,” a trader said.

Dublin-based peer Endo’s issues also declined.

The 6% senior notes due 2023 declined by 1¼ points to close at 64½ bid. The 6% senior notes moved down 2½ points to close at 61 bid.

Staines-upon-Thames, U.K.-based drug maker Mallinckrodt’s paper followed the sector trend.

The 4 7/8% senior notes due 2020 dipped 1 point to close at 88 bid.

Rackspace up

Meanwhile, Rackspace’s notes were moving upward, market sources said.

The 8 5/8% senior notes due 2024 added 2¾ points to close at 90½ bid.

The 8 5/8% notes saw about $16 million on the tape.

The San Antonio-based private cloud computing name held a conference call with stakeholders on Wednesday.

“It’s private, but from what we can tell it looks like the holders are happy,” a trader said.

The company’s notes have been volatile over the last year as it works to revitalize the business, marked by hundreds of layoffs and the replacement its senior management.

Tallgrass notes lower

In energy, Tallgrass’ notes dropped during the Wednesday session, traders said.

The 5½% senior notes due 2028 slid 3½ points to close at 94½ bid.

The notes saw about $16 million trading.

After the Tuesday close, news broke that the Leawood, Kan.-based energy transportation name had received a buyout offer from private equity firm Blackstone that would take the company private.

Blackstone already owns 44.2% of the company’s common stock, offering $19.20 per share for the outstanding amount.

The stock has lost about 40% of its value recently.

“The equity has gotten destroyed over the last few months so it seems opportunistic for both sides,” a trader said.

Oil gains

As oil futures rose, distressed energy tranches saw a bump, market sources said.

Houston-based oil and gas producer Oasis’ paper added value on Wednesday.

The 6¼% senior notes due 2026 rose ½ point to close at 80 bid.

London-based contract driller Valaris’ notes was seen rising.

The 7¾% senior notes due 2026 tacked on ¼ point to close at 63 bid. The 5.2% senior notes due 2025 also improved by ¼ point to close at 59½ bid.

Houston-based driller Diamond Offshore’s issues were also positive.

The 7 7/8% senior notes due 2025 added 3¼ points to close at 92½ bid. The 5.7% senior notes due 2039 garnered ½ point to close at 62¼ bid.

As government benchmarks showed that U.S. crude oil stockpiles dropped, futures shot up.

West Texas Intermediate crude oil futures for October delivery racked up 85 cents to close the session at $55.78 per barrel.

North Sea Brent crude oil futures for October delivery settled at $60.49 per barrel after a 98 cent pickup.

Frontier declines

Elsewhere, in telecom, Frontier’s paper saw a decline, traders said.

The 10½% senior notes due 2022 lost ¾ point to close at 52 bid.

The Norwalk, Conn.-based wireline communications name has seen its debt come under pressure in recent months as the company decides how to handle an impending maturity wall.

© 2015 Prospect News.
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